Official Report: Minutes of Evidence
Committee for Infrastructure, meeting on Wednesday, 27 January 2021
Members present for all or part of the proceedings:Miss Michelle McIlveen (Chairperson)
Mr David Hilditch (Deputy Chairperson)
Ms Martina Anderson
Mr Roy Beggs
Mr Cathal Boylan
Mr Keith Buchanan
Mrs Dolores Kelly
Ms Liz Kimmins
Mr Andrew Muir
Witnesses:Mrs Karen Magill, Bus and Coach Northern Ireland
Mr Niall McKeever, Bus and Coach Northern Ireland
Mr Edwin Henry, Coach Operators Northern Ireland
Mr John Jeffers, Coach Operators Northern Ireland
COVID-19 Financial Assistance for Coach and Bus Operators: Bus and Coach Northern Ireland; Coach Operators Northern Ireland
The Chairperson (Miss McIlveen): I welcome Karen Magill, chief executive, and Niall McKeever, chairman, of Bus and Coach Northern Ireland (BCNI); and Edwin Henry, chief executive, and John Jeffers, chairman, of Coach Operators Northern Ireland (CONI). You are all welcome to the Committee.
Obviously, you will be aware of the Minister's announcement yesterday that she has now written to the First Minister and deputy First Minister seeking powers to develop a second financial assistance scheme for private bus and coach operators. That is welcome and timely, given your planned attendance at the Committee. Maybe I will suppress the cynic in me and welcome it as a happy coincidence. Bearing that in mind, it is still appropriate for you to put on record the real challenges that the sector has experienced over the past 10 months. I suppose that, given the lack of detail that we now have via the press release with regard to what is proposed, it would be useful to hear, in your responses, what you feel a second scheme would and should be. My concern is, perhaps, that it may just be the same scheme being extended. Taking account of the past six months and noting the comments in your paper, that will not necessarily be appropriate.
Obviously, there are two organisations here. I will call John Jeffers first, and then Karen and Edwin, if that is OK.
The Committee Clerk: Edwin is missing.
The Committee Clerk: We have Karen Magill, Niall McKeever and John Jeffers. Edwin is not here. There are only three.
Mr John Jeffers (Coach Operators Northern Ireland): Hello?
Mr Jeffers: I was not sure whether I was on.
The last scheme, basically, was rolled out at short notice and could, in our opinion, have been handled a lot better. We were told that we would have some negotiation on the establishment of the scheme itself. There were a few Zoom meetings back and forwards. At the end of the day, there was no real, allowable input from our end. The Department used the word "negotiation"; we were led to believe that that was what we would get. However, in the end, we were told what was going to happen, and the scheme was launched and put into place. We were also told that a lot of money would be sent out before Christmas and that some applications would be audited retrospectively. It turns out that those applications are still being audited by the Department and are being gone through with a fine-tooth comb. A lot of operators have had no money and are on their knees.
Last summer — July and August — the whole coach industry was looking forward, everybody thought, to it opening up now in March and April. We now know that the coach industry will not open up until March or April 2022 at the very earliest. To take that forward, yes, we appreciate the scheme that was put in place. However, an appeal process needs to be put into it. A lot of toing and froing is needed just to address that scheme. If a new, current scheme is to be run, basically, from the start of October through to March, we have eight to 10 weeks to negotiate the sort of scheme that is implemented so that it is in favour of operators. A 40% cap was put on the lower end of the scheme that was implemented, which ruled out many of the lower-end operators. Those are the guys who actually need more support and need the money. As I said, after the end of March, nothing will happen until March or April 2022. We ask that, in our current negotiations over the next eight or 10 weeks, the Department is mindful of that and allows some sort of scheme to be put in place whereby there could be almost a monthly payment made based on what we agree now.
With regard to the finer details of the scheme, I would be wasting time here going through it point by point and bit by bit. However, by way of an example of what happened earlier, we were told by the Department that operators could apply for part B of the Department for the Economy's scheme. When that was rolled out, taxi and bus operators were exempt. Again, guys took a hit on the back foot, and they got nothing.
As it sits, an awful lot of people have not had any financial assistance. I know for a fact that some coach companies are close to going to the wall. A couple of limited companies are considering closing and maybe reopening in 18 months if the market dictates. That is really where CONI is at the minute. We speak for 46 operators, 265 vehicles and the wide range of work covered in what we are talking about here. Are there any questions that anybody wants to ask?
Mrs Karen Magill (Bus and Coach Northern Ireland): Good morning, Chair and members. Thanks for the opportunity to attend today. We submitted a report to you. We tried to keep it brief by way of information on what is, we believe, a little-known and little-understood industry. Part of that report was to address some of the limitations and concerns that we had with the current scheme, which did not do the job that it set out to do. We have also been working on what, we think, is a way forward for a second scheme.
Mrs Magill: We are very pleased with the announcement yesterday and have to appreciate the fact that the Minister had taken on the powers and responsibility for us at late notice and tried to do her best with the scheme that we currently have. As John said, there are still probably about 30% of applicants who have not received anything. We know that officials are doing their best to get through the scheme, but, with the auditing and other concerns, it is taking a bit more time than they had initially thought.
Our members are also in a precarious position regarding where they go from here, not just because some of them have not received any payment but because the payments that have been received were far below what had been announced with the scheme. As you know, there was a financial standing amount that was announced to all operators of £8,000 and £4,450 for their vehicles, but that did not materialise. The requirements for the scheme were fairly convoluted and complicated. A lot of other schemes required a —.
Mrs Magill: A lot of people have not received any money at this stage, and it is not just because of the system. Some of them were eliminated from the scheme because of the eligibility criteria, and some received much less than was announced because of how the financial eligibility criteria were worked out. Our paper has highlighted some of those issues for you.
Apart from the eligibility, the biggest limitation on the scheme was the cap of £100,000. I am sure that you are all aware that the EU had introduced a temporary framework to allow the state aid limit to be increased because of the COVID pandemic, and we fail to understand why the scheme is limited, especially when you have coach tour operators who have vehicles in their fleet to the value of up to £10 million, have finances of up to £100,000 per month and have had to take coronavirus business interruption loan scheme (CBILS) loans to keep their company going. Our biggest CBILS loan for our members is £1·6 million. The current scheme failed to address or recognise those borrowings, so we hope that, together, we can work with the Minister and her officials on where we are with the next scheme, but, as John said, we need to seriously be able to consult. We need to be able to discuss it, and we need to make sure that, when we go out to our members, we give them
what the scheme looks like, because that did not happen in the past. We can address the limitations and problems in this scheme, learn from those and move on to the second scheme.
Obviously, at the time that we wrote the report to you, Chair, the announcement had not been made, and it is still providential that we are talking to the Committee today, because another issue that the industry has is the very fact that we are very —.
Mrs Magill: I have it as loud as I can have it. Has it improved at all?
Mrs Magill: OK. Is there anything in particular that I should repeat for you?
Mrs Magill: Yes, a lot of what I said has come from that. What I tried to do was highlight some of the major issues with the current scheme. In order to move forward with a new scheme, we need to address those issues so that, ultimately, the second scheme and any support are targeted, dedicated and focused to help the industry to survive the crisis.
We were the first to close; we will be last to open. We may see a modest return to some form of work before the end of 2021, but 2022 will see the start. We have to look at where the cruise ships are and where our foreign visitors and our travelling public are. In the meantime, we have to make sure that we address the issues with the current scheme and that what we do on the second scheme is in conjunction with officials and the Minister and actually works to help the industry to survive the crisis.
Mr Niall McKeever (Bus and Coach Northern Ireland): I reiterate and support John and Karen's statements. It has certainly been a journey over the past 10 or 11 months for everybody. What has happened over the past six or seven months in particular has been a development of a relationship between DFI and the private coach organisations. What is really good is that we are beginning to understand each other a lot more clearly. We understand the importance of what the private sector does in terms of the tapestry of public transport that is provided in Northern Ireland and the emphasis on having that capacity available for public use once the crisis is over. Unfortunately, the private sector came into the crisis at its lowest ebb, at the back end of winter and preparing for what would have been a spring and summer harvest that did not happen, so, by the time we reached June and July, there were severe difficulties. Those difficulties will continue, obviously, as the crisis continues this year. As we see it alleviating, hopefully by the end of quarter three, we will begin to see some green shoots.
We need to learn from the processes of the first round of funding. The interrogation has been somewhat overcomplicated and, perhaps, overcostly for the Department and, indeed, for the private sector in bringing in our accountants to support what is, as you can imagine, a costly operation for buses and their maintenance, service and protection. I am confident that we will address the issues that were found in the first round of funding. The Department for Infrastructure had, I think, a quick learning curve once it established the vires of payments. The negotiation teams have been more than helpful in trying to understand the key areas where we struggle. Yes, nothing is perfect, and we are now trying to iron out the kinks in the system. There is a much clearer understanding of the operational crisis that we have, but, more importantly, the operational services that we provide. We range from airports to schools, from commuters to sports to culture events — you name it. Without the infrastructure of the private sector supporting Translink, the capacity would not be there for us to return to some normality.
I was listening briefly to Martina talking about electric charging points. We started to look at the environmental strategy for Northern Ireland, the carbon-neutral targets and the reduction in car ownership and licensing. We started to see that public transport will start to raise
sector fully prepared for.
Mr Edwin Henry (Coach Operators Northern Ireland): Good morning, and I apologise for being a little late. I had an update circular from DFI yesterday saying that we started at 11.00 am.
I come from the perspective of having been an operator for 20 years. We have found it very difficult since March 2020. We normally do 196 tours from different operators in Northern Ireland, to Switzerland and all the different places. Our outgoings have been atrocious, and we have not been compensated. This thing has gone on, and I thank Nichola Mallon for bringing the scheme forward; I appreciate that. As everyone else has indicated, it has come late. When we met Gerald at DFI, we were given no opportunity to discuss the finer points. This was forced on us. Yes, we negotiated as we went along, but, at the end of the day, the 40% cap was never mentioned. A lot of criteria were brought in which we were not privy to and did not agree to. I am also vice chairman of the CONI group, which represents 46 members. A lot of those people have received nothing because of the 40% rule and those later things that were brought in that we were not privy to when John and I attended on behalf of CONI.
I still have a yard full of coaches sitting idle. This thing is not going to go away. We have just had emails from two tour operators. As I said, we did 196 tours per year, but that is cancelled for 2021. It was cancelled in 2020. It does not take a smart man to sit back and think, "We have been paying up to nearly £10,000 a month in finance, and the vehicles are depreciating". We were asked to submit this claim. It has cost a lot of money to do that. A lot of our members are not even being kept informed of what is happening. At the end of the day, a lot of companies cannot stand back and wait. I appreciate that Karen represents a number of operators, and we represent them. However, speaking personally as an operator, I think that the scheme has been very slow. I appreciate what everyone else is doing but, if we ran our business the way that other people run the schemes, we would come in for a bit of criticism. I simply say that this thing has to be looked at and worked out faster in the months ahead. The year 2021 will be a very serious year for private operators.
The Chairperson (Miss McIlveen): Thank you. Both organisations have highlighted how they each have had discussions with the Department in advance of the previous scheme. Obviously, a bid for £12 million was submitted, and the total scheme was allocated £5 million. Karen, you gave us a detailed piece around the £100,000 cap and how it has been a mystery to the sector how it was introduced. You went on to detail the issues around state aid. In the discussions that you have had since the scheme came into operation, what flexibility has been shown by the Department in relation to any future scheme?
Mrs Magill: We have had only very generic discussions to this point, obviously. We questioned the £100,000 cap and some of the other scheme eligibility criteria that we were not involved in. Unfortunately, we have not received satisfactory responses on the rationale behind those, and we still do not understand the £100,000 cap, even in terms of value for money. I mentioned that in the report, because it is one of the biggest limitations on the success of the next scheme.
Mrs Magill: We put together a detailed bid, giving as much information as we could to the Department. We said that we fully understood that local government could not give us all the money required for the industry to survive. There were two things that were very important: recognition of the substantial contribution that we make to the local economy and the fact that the biggest costs that we faced were our finance, insurance and rent costs. That is where we looked for their support, and that is where the £12 million came from. That is what, we believed, would be required to survive from July to March 2021. In the background there was the job retention scheme, which was a help for operators, and there was some relief under the supply relief from the Education Authority, which has complicated this scheme, but those were the most important figures. They were all there. We could prove and substantiate them. That is why we were disappointed when the scheme came out and £5 million was asked for to support the industry, even though we had discussed it with Minister Mallon and her officials. It was never going to get us through, and now we need a second scheme. That highlights where we are.
Our first cancellation was at the end of February 2020; we are now 11 months without any money. We are all aware that there was a delay with Economy, and then Minister Mallon was asked to take this on. We appreciate the fact that she did that. She has worked quickly and hard with officials to move forward, but there has been a lack of understanding and knowledge of our industry and a lack of listening. We highlighted the different business models and how the finance needed to be structured, but that was not taken on board at that time. At the weekend, I had an operator — a husband and wife who own a small business that is important to the local school industry —.
Mrs Magill: Every weekend is the same: my operators are on to me. At the weekend, a lady who owns a company was actually crying to me, because she has no way of getting forward. The scheme gave her £2,500, even though it was proved that her loss of income was 77%. We have got to do something now and quickly, and we have got to reassure operators, whom we need to help Northern Ireland recover, that the next scheme will be focused on the different business models and will provide adequate support to get them through. They are all in the same position. Our people are surviving on Bounce Back loans and CBILS loans. That is the critical position that we are in.
The Chairperson (Miss McIlveen): The other issue is that the scheme was overcomplicated. I guess that that has been articulated to officials to bear in mind in the drafting of any future scheme. In the Minister's press release, she has given an undertaking that the sector will be engaged with on any future scheme. Has that been arranged?
Mrs Magill: I received a letter late last evening from Minister Mallon advising of the second scheme. It also stated that a meeting would be set up quickly and that she would consult us on the future of the scheme.
Mr Boylan: Thank you for your presentations. Karen, I am just trying to get a better understanding of the previous scheme. Can you elaborate on how it has helped the industry and maybe give me a wee update on where the industry is now and how the finances are affected across the industry in percentage terms? That is for whoever wants to answer those questions.
Mrs Magill: I will start off, but I am sure others will help out. There are 209 operators in the Province. They have to carry out a mix of work, be that school work, private hire, tourism or local tourism. You have to do that to supplement your income. Some 30% of our industry is involved in home-to-school work. They were afforded their payments from March until June, which helped them. A couple of operators transported key workers to the like of Moy Park for a couple of months. The rest of the industry — 70% — was completely closed. It had no income: nothing. Even the businesses that got some supply relief were limited in how much they could get. The home-to-school payments are only a contribution to the overhead of the company; they are paid for up to two hours per day for drivers and vehicles and a percentage of the contribution to the company overhead. At this point in time, everybody is in dire straits.
I am told by the Department that there were 153 applications for the scheme. Of those, 25% were eliminated and did not get anything. As of yesterday, 69 have received money. I asked how many received the full complement, but I have not yet received that information. I know that 50% of the people in our organisation who got their money did not get the full complement that was announced. The people whom I know who have got money are very appreciative, but it will pay only some of the debts that they have — tax bills are being paid at the moment — and some historical bills; it will not really do anything to help their survival. That is why we need a second scheme. We need finances to be covered; we need the borrowings and loans to be addressed. That is an added pressure and cost to businesses that do not have any money coming in. There is no money coming in, because our doors are closed. Things are not great, but yesterday's announcement brings more hope, as long as we make sure that the financial support scheme is focused on and dedicated to the different business models and affords them a level of support that will help them to get through.
Mr Boylan: Would anybody like to comment on the present state of the finances and affairs of the companies?
Mrs Magill: Things are bad, Cathal. People are living with very particular and upsetting worries. A lot of them have personal guarantees with their finance, which is their homes. They have borrowed money and are living on credit cards. They are doing their best. They are waiting for the scheme. They waited for the scheme because they thought that it would work. They were able to calculate in their heads, according to the eligibility that was mentioned to us at the start, what they would get. That did not happen; it happened for only a few people. It is as bad as it can be. They are living on credit cards and are crying to the chief executive of the organisation, who is doing their best, working with the Departments and the Ministers to do what they can. Their families are affected, their health is affected, and the future of businesses that they have spent many years building up is affected.
In the past five years, the industry has spent £90 million on new vehicles. It has improved its offer and lifted its standards. It brings in international visitors and supports the economy. The international visitors that we bring in contribute £160 million to the economy. The people in the industry feel totally neglected. They have been pulled from pillar to post between Economy and Infrastructure for a while, and then the scheme that we had hoped would work was disappointing. However, we can move forward and have the cap lifted, and we can look at the real state aid limit that exists to help businesses. None of us is looking for €800,000, but we cannot limit, for whatever reason, the support that we are allowed to pay so that businesses can survive and can be here to help Northern Ireland to recover. We are an important part of that recovery, as the tourism industry will tell you. As John McGrillen has said, the coach tourism industry is little known and little understood, but it is the arteries of tourism in the Province. We need over 2,000 vehicles every year to support the cruise ships that come here. The cruise ship industry is massive. We have visitors from countries such as America, New Zealand, Australia and Germany. We have 70,000 Chinese people coming in.
We are supporting that industry, the hotels, the businesses and the restaurants. We are doing that all day every day and have invested heavily with no support from government, so we need that amount of quid pro quo.
I will give you one example. The Europa Hotel in Belfast, in normal circumstances, has 50 coaches a week coming in during the height of the tourism season, which runs from March to the end of September and into October. That is 50 coaches a week to one hotel. If you extrapolate that across all the hotels in Belfast, even just with accommodation, you are talking about £50 million. CIE Tours, as one tour operator, runs 600 overnight tours into Belfast and around the Province, and there are tour operators from the UK, England, Wales, the Republic of Ireland and America. They are coming in from everywhere. This is a massive industry. We need to recognise that, and we need to make sure that, in the next scheme, we are involved and that what happens is transparent. We will have to do a bit of work, because there are different business models, but we have written our suggestions and want to sit down with the Minister and her officials as soon as possible to get that scheme up and running.
Mr Boylan: Sorry to interrupt you. I want to follow up on that point. You identified £12 million, and you got £5 million. Where are you now with your engagement with the Department, and can you estimate now what exactly the industry will need to cover you for the next period? You are talking about the recovery going into 2022, so we have not reached the end.
Mrs Magill: Cathal, I have to be honest with you about our liaison with the Department, and I have to agree with what our chairman said. In working with Chris Hughes and the other officials who have been running the scheme for us, we could not complain about the level of work and commitment and the amount of communication that there is now and that has been in place since the scheme has been up and running. They have learned a lot. If that had been the case at the start, we obviously would not be sitting in front of the Committee today looking for more money.
The bottom line is that we asked for £12 million, and we could substantiate that £12 million. Of that £12 million, we have £5 million. We still do not understand it, given that we asked the Minister for £12 million and asked her to speak to the Executive about the finance and borrowing and said that that extra support was needed. We do not understand it, but we still need the residual of that £12 million. We also have to consider the level of borrowings. One of our operators is paying an extra £5,000 a month on a CBILS loan, and another is paying £7,000 a month. Where will he find the business to pay that before 2022? That is why we had to address the fact, as we have done in the paper, that there was a failure initially to acknowledge the level of borrowings.
There cannot be that same failure now, because we need to move forward. We need to address that, because these people need to be here, not just for tourism. Our communities will never look the same without the coach operators. They support public transport, and, as Translink does, they provide permit schemes. We are also in local communities, working with health trusts and doing home-to-school work. We do local school trips, work with the elderly and outings for Christmas. We are in every part of our community life. That is what our job is.
I took over the running of the organisation over 19 years ago, and I have watched every business work harder than anybody I have seen. I am 60 years of age, and I have been in industry all over the world. I have seen those businesses invest every penny back into their people, their products, their vehicles and their operating centres. We cannot stand by and watch that now go to rack and ruin because we have not provided a scheme that the industry is telling you about and knows how to work. We need to get that proper consultation to get the scheme more targeted and to make the financial criteria less convoluted. How can somebody who has had a 77% downturn in turnover and has taken on a £40,000 CBILS loan be awarded £2,500 instead of £12,450? The scheme added extra processes that are not there. No other grant scheme has the same level of scrutiny as ours. We took a 40% downturn in our numbers. We need to look at that, and we need the state aid issue to be resolved ASAP before we can move forward. Otherwise, the people who have managed to get money under the scheme are set to get very little. They are the people who have the big loans of £1·6 million, £1·5 million or £1·2 million.
Mr Boylan: Thank you very much for your answers. I am mindful that other members want to get in.
Mr K Buchanan: I will rattle through a few questions. Thank you very much for your presentations, Karen, Edwin, Niall and John, and your points so far.
Edwin mentioned 46 operators. Karen, how many operators do you represent out of the 209? Between the two organisations that we are talking to today, is 209 operators the total membership?
Mrs Magill: No, it is not 209 at all. We represent probably 50% of the fleet, but we represent only 35 organisations. Within that, however, we have the biggest operators in the Province, but we also work with some very small operators. A number of operators are not aligned to any organisation. We have been writing to those operators periodically since the start of the pandemic because we felt that they needed to be informed and should receive support. We do that regularly, and we have regular phone calls from many of them outside the organisation.
Mr K Buchanan: OK. So, between the two organisations, according to my maths, you represent 81 operators. Do the remainder, then, effectively follow the lead of the two organisations to a degree?
Mrs Magill: Well, probably, yes. There is a lot of communication between non-members and members, because a lot of our people will talk to people who are outside the organisation. I would say that that is probably right.
Mr K Buchanan: OK. I have a question, then, for Edwin or John about the £8,000 and the £4,450. Bus 1 was supposed to get £8,000, and bus 2 and every additional bus was to get £4,450. How did those figures work out? I took the hint when I heard mention of 40%. I understand that you are an operator, Edwin. From an operator's point of view, can you explain the £8,000 and £4,450 figures? Did those materialise?
Mr Henry: I am sorry; what was that? You cut out there.
Mr K Buchanan: If you recall, Edwin, bus 1 was to get £8,000 and, for every additional bus, the operator was to get £4,450. What did that turn out to be in reality? Is that the way that that scheme worked out?
Mr Henry: Oh, absolutely [Inaudible.]
Mr Jeffers: The £8,000 and £4,450 figures are derived from the legal financial standing that the operator is supposed to hold as sufficient cash at hand in the bank to run their organisation. The Department took a figure that was suggested by one of our guys and used it as a benchmark. To be honest, it should have been higher.
The other thing that we would ask for in relation to the new scheme and going forward after March 2021 is that the Department has a few meetings with us that are not time-constrained and do not focus on any detrimental issues that the Department might want to drop in at the end, like the 40%. The 40% was dropped on us, and no one knew that it was coming. As Karen pointed out, that had a detrimental effect on the returns and the money that was obtained through the scheme to date.
We hope that, in the second scheme, the 40% will be put in the bin. That is why we need to have a long and open-ended meeting with the Department and a commitment that it will talk to us and take our input on board. We are not asking for anything unreasonable. As Karen said, it is to keep the doors open and the finance companies at bay. We asked the Department to contact the finance companies and banks to see whether it could negotiate something on our behalf. We got no feedback from that request. Again, that process needs to be addressed. All operators, not just our members and Karen's members but the people who are not represented, are entitled to the scheme. That is why we need a good, comprehensive scheme, and we need to put our heads together with the Department over the next couple of weeks to get a scheme off the ground before the end of March.
Mr K Buchanan: I heard Karen say that there were 153 applicants, and there are 209 operators. Why have only three quarters applied?
Mr Jeffers: Some people did not apply because they reckoned that, when they considered the 40%, they were under the radar. The £10,000 initial grant has been taken into consideration. Some people paying rates qualified for the £25,000 grant, and others were still doing the home-to-school work that forms a high proportion of their income. The operators probably felt that, when their figures were readjusted for that 40%, they would not get anything. It also takes a lot of money to pay an accountant to go through the figures. I know of some guys who have had bills of £2,000 from their accountants for processing the applications. The operators will take all of that into consideration, and there will be individual reasons why certain companies will not have applied.
Mrs Magill: I want to clarify something important, Mr Buchanan. The 40% eligibility criterion was made public to us before the scheme started. We were aware of it, because the Department said that it would be the same as in other schemes. The problem was that the formula for the £8,000 and £4,450 was an easy parameter for the officials, who did not know the industry well enough, and the maximum reserve that an operator needs to have is a quantifiable amount. However, the Department introduced another process to that step to calculate loss, and that is where the scheme has fallen down for a lot of people. The Department looks at your percentage turnover but works on your loss for the period, and that has muddied the waters for that scheme. We understand that there are governance responsibilities and recognise that auditors will look at the scheme, but we need to be more sensible about the support given to the industry. The calculated loss has been difficult for the industry.
Mr K Buchanan: I have two quick points. Why is the accounting such an expensive way of doing that? I appreciate that accountants have to get a fee, but was there any change in the reason? Did a specific accountant have to do the paperwork for the operators?
Mr Jeffers: A portal was supplied by the Department. The Department required the operator to have it certified by their accountant before submission. When that was done, a second portal was put out. Finally, a third version of the portal actually accepted the information to be submitted. By the time it was submitted, accountants had racked up hours and hours of fees. Again, that cost will go into this period's loss for any company that applied for the support.
Mrs Magill: It should have been fairly straightforward, but, unfortunately, the analysis of what counted as your expenditure was a bit confusing and the accountants had to go back and forward a few times to the Department. They also had to be satisfied with the figures, because they had to make their own independent declaration. There was a lot of correspondence between the Department and some of the accountants, and there was confusion about formulas and analysis of the inclusion of expenditure.
I hope that we have all learned from that. Yes, everybody has had a considerable bill from the accountants.
Mr K Buchanan: I have a final comment; it is not a question. It refers to the comment in your paper that Minister Dodds did not take responsibility. Minister Dodds has over 30 schemes that she is taking responsibility for, and Minister Mallon has taken responsibility for two. Looking at that reflection, it is fair to say that Minister Dodds is pulling her weight in this exceptional time. Minister Mallon took six, seven or eight months to wake up to the fact that she needed to do something for both industries. That said, it has been late, and you said that, as of yesterday, she has delivered only some money to some. Those comments are noted, but I criticise the comment in the paper.
Mrs Magill: I am not here to criticise the Minister, but I forwarded —.
Mrs Magill: I was not criticising Minister Dodds. We have worked with her since March. We did not receive a response on our scheme from her until late September. It was not a criticism; it was merely stating the fact of what happened.
Mr Muir: Thank you to everyone for taking the time to meet us virtually this morning. I remember when we first met about this in the summer of last year. We were all a bit more hopeful about the situation, but, obviously, the pandemic continues to wreak lots of economic damage and hardship across Northern Ireland, particularly for private coach operators.
My question is about the number of redundancies that have been made to date, taking it into account that the cost of keeping staff on furlough requires the payment of pension and National Insurance costs. What are the prospects for trade in the summer? Is it that this year will be similar to last year and, as a result, it will be important that the Northern Ireland Executive come forward with funding for the next financial year as well? Rather than a second scheme, will we need something to get us through the longer term?
Mrs Magill: John, do you want to answer that?
Mr Jeffers: I said that in my opening presentation, and I repeated it. After the second scheme is negotiated and worked out, from 1 April onwards, we will need something in place. We have the opportunity now to look at the next financial year as part of our negotiations with the Department. It has to be something that is strong and robust, so that operators will get enough money to keep the doors open until March or April 2022. Even then, the level of work will not be the same as that in the last couple of years. It will start off more slowly, with lower numbers, because people will be hesitant to travel. There might be more domestic market and more people coming up from the South. There will not be massive numbers of cruise ships or people flying around the world.
It has to be taken into consideration that these guys will need some sort of a package going forward from 1 April. Hopefully, we can negotiate that with the Department as part of the second scheme and going forward. Even agreeing on a monthly payment after 1 April would mean that everybody is at least getting something towards keeping their insurance, finances and rent and rates covered. We heard the other day from landlords in the Holylands that students were going to stop paying their rent. That is like us not paying for our buses: the finance companies will repossess the buses. That is the last thing that you want, because all those businesses would fold. That is part of what we need to talk to the Department about in a constructive and robust manner. As well as the bus industry, the taxi industry, wedding cars and lorries have suffered, and we should all work with each other. The bottom line is that we are all transport.
Mrs Magill: Andrew, I will also answer that. I think that it will be 2022 before we can say that our industry is making any move forward. There will be a modest return from quarter three onwards, and that will allow people to have local staycations, but the number of groups travelling will be limited. The attractions will start to open again, and the vaccine situation is an important issue, but we have no commitment from any of our big tour operators and no actual bookings among the greater numbers of people whom we bring in internationally. There have been some cancellations on the cruise ships, so, in 2021, the work will be very modest, if there is any work at all.
Mr Muir: Is there any understanding of the number of redundancies that have occurred so far?
Mr Henry: Andrew, as far as I am concerned, we have certainly not made anybody redundant and do not intend to, but this is a little thing for your mind: we have been paying £6,000 a month for two vehicles. I bought the vehicles in 2019. Those vehicles have never turned a wheel. They have never started. They are sitting there and 22 months are cancelled, so it does not take a mathematician to work out that that will cost about £130,000. I have no compensation for that and no tours. Basically, as Karen said, I am still paying that money. We have not got a holiday. We had a little bit of corn in the barn to pull through this tight part, but we are holding on to our men through furlough. There will be a problem, because, as John said, it will be 2022 before this gets going.
Mrs Magill: Andrew, yes, there were a few redundancies among our members in the first three months. About 30 people were made redundant. In the meantime, operators are trying to hold on to their staff. Some of our people have diversified, and, obviously, the job retention scheme has been a big help to them. Our industry is already short of drivers. We have a serious problem with driver shortages. Drivers are precious, and everybody is trying to hold on to the good people that they have. They have borrowed money and have done what they can to hold on to their staff.
Mr Muir: If furlough is ended this year, Karen, as, we suspect, it will be, that will have a significant impact on your sector, because it will be one of the sectors that still have not come back to full trading.
Mrs Magill: I absolutely agree. It would be totally disastrous. Completely.
The Chairperson (Miss McIlveen): I remind those who are not speaking to put their mics on mute, because there is feedback and it is making it difficult for us to hear.
Ms Anderson: I thank all of you for the presentation, and I thank Karen for the report and for the information that we received. I want to make sure that we are all on the one page. Ministers taking on the powers from the Financial Assistance Act is not new. The Finance Minister took on the powers for the localised restrictions schemes and the technical adjustments that have to be made to roll that over. We do not hear announcements that they will ask for more powers; it is just done. I want to make sure that we are all on the same page.
Karen and John, I do not know whether you can answer this question. You said that £12 million was asked for. I know that the Minister got all the money from the bids that she put in, so I do not know why she asked for £5 million when you had outlined that £12 million was needed. Maybe you could come back on that.
In one section of your brief, Karen, you mention the criteria issue, and you have talked about it today. You said that the accountants speak to you, and, generally, they feel that the scheme is overcomplicated. Karen, you said today that it is convoluted. It seems like déjà vu: we are hearing the same things as we heard from the taxi drivers, including those who temporarily suspended their insurance. They did not know [Inaudible.]
You talked about the number of operators that you represent, and, from a rough calculation, it looks to be about 43% of the 209. That leaves 57% of the operators. To your knowledge — you may not know this — is the Department also engaging with all the smaller operators? There are about seven operators in the Derry council district. One of them is P Dunne Bus Hire. It spent £2,000 or £3,000 on accountants to do what it had to do to provide three years of accounts to show that its business was viable for the three years beforehand. I do not know why that was the case, but it did that. Rather than a 40% downturn, that showed a 50% downturn, yet it is part of the 25% that were eliminated. They were not eligible.
I want to ask you about the fanfare of the announcement of the £8,000 and the £4,500. Karen, did I hear you right? Did you say that it was 25%? Could you elaborate on that and talk about those who were ineligible? I think that you said that only two thirds applied.
Regardless of the scheme, I am concerned that the next scheme might still have criteria built into it that might exclude, unless they also include all the operators, particularly the smaller operators. I stand by everything that you are arguing and asking for, for your outfit and what needs to happen there, but I also want the smaller operators to be captured in the discussions with the officials. I would like some information from you on all those questions.
Mrs Magill: First, I still do not know why the request was for £5 million. Our last meeting with the Minister was on 27 October. At that stage, our costed proposal was for every operator. John and I represent only 40-odd per cent of operators, but we extrapolated and brought in every one of the 209 operators — the number of vehicles and the size of the companies — and that is where the analysis came from in our report. We brought them all in, and they all formed part of that detailed proposal. I still do not understand where the £5 million came from. I cannot answer that question, and nobody in the Department has answered it either.
The 25% of people who were not eligible was a figure that was given to me by the officials from the Department. I get a weekly briefing from them about where they are with processing, and they said that 33% of applications had not made the cut. That is where that figure came from. The Department —.
Mrs Magill: No, 33 operators. That is where that figure came from.
We have written as much as we can about how, we think, the scheme should work. Nobody knows the industry better than the industry. We have looked at all the experiences of our people who have applied for the scheme and how they have been hindered. We could understand the 40% turnover, but we did not understand the extra need to qualify the calculated loss, because it was less than the £8,000 and £4,450. We could not understand that, and that was never communicated to us. In consultation with our members and directors, we have written a detailed and lengthy piece and have it ready to talk to the Minister and her officials about. We have categorised that according to business models and included home-to-school relief, coach tour operators, new businesses and people with loans, Bounce Back loans and CBILS loans. We have categorised all that. Hopefully, the Department will appreciate and consider that.
Ms Anderson: Chair, we need to go back to the Department and ask it for a rationale for the £5 million. We know that the money is in the system. Whilst I appreciate what Karen has said about the criteria that were engaged on at her end with the departmental officials, I know that some operators do not have rent overheads and operate from home. There may be other information that the 57% of operators also want to put on the table so that the Department captures everything in full when it is devising the next scheme. Let us not get to a situation in which there are obstacles such as those outlined today. This is not the only sector with schemes that are being designed by the Department for Infrastructure. As a Committee, we will take all that forward. Frankly, it seems that a bit of a dog's dinner is being made of the schemes, and we need to address all that.
Mr Hilditch: A lot of the questions have been answered in the substantial comeback from the delegation, and they have given us informative answers. There is one thing that I want to clear up in relation to part B of the Economy Department's finance grants. Who told you that you were not allowed to apply under part B?
Just to put you in the picture, the taxi operators eventually were taken in to section B, under the premise that they were in the supply chain by bringing tourists to hotels, restaurants and visitor attractions etc. It is clear from the criteria that the bus companies depots but not the drivers would have qualified for part B. Was there a breakdown somewhere, or was that not followed up? Did anybody lobby on your behalf?
Mrs Magill: I think that John raised that point at the start. The scheme said that anybody who was availing of financial support under the bus and coach scheme was not allowed to apply under part B. As I understand it, anybody who did not get support from the bus and coach scheme could have applied. I think that John had some comments at the start about why they were not allowed to apply.
Mr Jeffers: It was part of the criteria at the start that you were not allowed to apply if you were a bus or taxi operator. That might have changed after it was launched initially, but operators took it on board and did not relook at it. If they are allowed to claim it, they can. However, at the end of the day, it will go against their claim to the Department's scheme. The Department has said clearly that there will be no double funding, so, if they applied for part B and got it, it would go against their next claim.
Mr Hilditch: I understand that, John. I am not advocating that anybody switch over now. It was just a concern that you had gone so long without money and help. That was all. I was just wondering how it came about that you did not qualify the same as taxi drivers, who now qualify. I appreciate that you have to go with the new scheme from Infrastructure.
Ms Kimmins: Thanks everyone. As others have said, it has been very informative. A lot of the questions that I was going to ask were answered in the briefing. However, I have two small questions.
Earlier you mentioned the Bounce Back loans and the business interruption loans. Have we any idea of how many operators have had to access those loans? Is it the majority of the sector at this stage, and are there any figures? Roughly, how much are we talking about that people have needed to borrow?
Mrs Magill: We did a scoping exercise of our members and found that 65% had to apply for loans. Our smallest CBILS loan is £450,000, and our largest is £1·6 million. The total borrowing for the 35 members is almost £8 million. As I said, for some of the bigger loans the repayment is £5,000 or £7,000 a month. Those are figures that I know from two of my largest operators. That becomes an anti-competitive area for them, because once they start again, their costs will increase because they have to cover those loans. There are the finance repayments that they have had to make and the additional interest on those. Unfortunately, we have members who have had to hand back some of their vehicles because they could not make their finance payments. That is the world that we are live in, unfortunately.
I am not sure whether John has done a scoping exercise of his organisation , but 65% of our operators have borrowed money under CBILS and Bounce Back.
Mr Jeffers: I do not think that our percentage would not be as high because, although we represent more operators, many of them have fewer vehicles and vehicles of lesser value. The top 10% or 20% would have the higher-value vehicles and would have availed of the scheme. I am not sure of the exact amounts because a lot of the information that some of the guys have is commercially sensitive and I would not want to delve into their finances. However, I know that they are getting it tight and really need help, and that is where the £100,000 cap needs lifted.
Mrs Magill: My operators are like my children in that they tell me everything [Laughter.]
Mr Jeffers: But you are more of a mother figure.
Mrs Magill: I probably am, and a very nosy one too.
Ms Kimmins: Can you expand on why people were denied in the first scheme? Were they given a reason? Following yesterday's announcement, would it be feasible to look at this like the taxi driver scheme, in which people were excluded because of the insurance breaks, so that applicants could apply retrospectively for the period that they were excluded in the first round? Could you engage with the Minister and the Department and get them to listen to the points that you have raised with us today so that anyone who has been excluded to date could claim retrospectively in any future scheme?
Mrs Magill: Yes, that would be a good starting point. In order to be eligible, you had to have a current operator's licence and your main activity had to be transport, and that is because we have some ancillary transport providers like nurseries. The third criterion was the 40% loss in income, and I think that that is what has excluded so many people. However, that is one of the areas that we need to look at because of the different incomes and different business models. It comes from a lack of understanding and knowledge of the industry. We do not expect officials to know everything right away; we had just hoped that they would listen. However, I think that that is what it was. Some people were fearful of the online application. Moreover, as John said, their accountants were saying, "You don't have a loss of over 40%", so they did not apply. For those who did, the additional criterion of a calculated loss just for the six months is what precluded them, and that is one of the big concerns that we raise in our new suggested scheme.
Mr Beggs: Hello. I thank everyone for their evidence and Karen for her paper. It is clear that there are a lot of concerns in the industry, particularly about the criteria. I am just trying to be clear about the key aspects of the criteria that, you think, are unreasonable. I picked out the £100,000 cap and the 40% loss of income that you mentioned. Should profitability not also be a factor rather than just the loss of income? What criteria, do you think, would be reasonable? Are criteria being used that, you think, are unreasonable in excluding people from the support scheme? Edwin expressed concern about the criteria, so I want to be clear about what criteria, you think, are unreasonable.
Mr Henry: In 2019, we put down £90,000 against a new coach. That does not come under the scheme; there is no place for it. The other thing is the depreciation of the coaches that we bought, and that is simply because they are higher-end coaches. By the end of 2021, we will be losing £40,000, £45,000 or £50,000. There was no built-in factor for depreciation. We calculated that we lost about £10,000 because of the 40% rule. We should have been getting more, but, because of the 40% rule, we lost out.
If we go into another scheme, it would need to be retrospective and go back to the first scheme. We lost £10,000 because of the 40% rule in the first one, and we lost £85,000, £90,000 on our vehicles. We are at a disadvantage. I know that Departments have to be accountable for money, but we have a lot of losses that are not visible. We need a way of making sure that those things are taken into account before the next scheme goes forward.
Mr Beggs: OK. Are there any other criteria that, you think, have been unreasonable?
Mrs Magill: The 40% rule was chosen because that is what other schemes looked at and what was reasonable for those schemes. What muddied the waters a bit was what we were allowed to include as expenditure. When the Department looked at income and expenditure, depreciation was not allowed for in the amount that we were allowed to include in expenditure, as Edwin said. There were other considerations. Unless you run a commercial business, you do not understand finance, balloon payments or Edwin's deposits for his vehicles. Those things needed to be included because they were part of that six months. That repayment was always going to have to be made, and depreciation is a fact.
Taking a more realistic look at what a business needs to include is definitely an area for discussion. When the Department looked at an operator's position against the reserve, it said that, if what they had lost was less than the reserves that it had promised, the operator was not getting it; they were getting only what they had lost. However, that was without including everything that needed to be included. Those are some of the things that we have looked at in the scheme.
The 40% figure was probably distorted slightly because a lot of people had the home-to-school supplier relief payments included as income. When the Department was looking at those applications, it obviously said, "Oh, well, their income is better because they had the supplier relief payment". That excluded a number of people from having their full contract award. We have tried to highlight and explain that in order to have it taken account of in the next scheme.
The other thing that we need to be mindful of is the fact that we are limited by the £100,000 cap. A bus and coach finance scheme started in the South of Ireland. It started off with £10 million, and all operators are covered by an €800,000 cap; they are allowed to get aid up to that level. As it sits, we have to sign a de minimis declaration. If you got £100,000 from this scheme and £25,000 or £10,000 from the rent scheme, you are already limited in what you can get. However, the COVID-19 pandemic is exceptional. That is why the EU temporary framework for the 800,000 limit has been extended until June. That is what it was set up for. We have written to the Department about this a number of times. We do not understand why there is this £100,000 cap and why we are being forced to sign the de minimis declaration for the €200,000 limit.
Mr Beggs: OK. My second point is on the level of support. I understood that it was going to be £8,000 for the first coach and a smaller amount for the second. I seem to have picked up that those figures have not come into being. Is that correct? What moneys have actually been given?
Mrs Magill: Some people got that award because their losses were massive. They met the criteria and got the award. Some people were due twice that and got it capped at £100,000. However, yes, there were companies that were successful. I have asked the Department how many and what percentage of operators got the full award, but it has not yet come back to me with those figures. I know that 30% of my people have still got nothing; their applications are still being considered. Of those who were successful in having bids or remittances, 30% did not get the full compensation.
Mr Beggs: This will be my final point. I would like to highlight that this is urgent. I know that you all need the finance, but, apart from that, there is a small window of opportunity with some of the COVID funding not being spent. I think that we have £500 million, and the Finance Minister is looking for bids. That money is available until the end of March. If something can be adjusted and quickly agreed and moved forward by the Department, who knows what money will be available? It is important that, if there is a route to getting money distributed quickly, that would be moved on.
Mrs D Kelly: Thank you very much for the presentation. I know that, at this stage of the game, there is very little that can be added. I have had conflicting reports insofar as a number of operators are quite content with the scheme. I understand that the £100,000 cap impacts on 2% of the operators in the industry. Given that the majority of the work outlined is in tourism and hospitality, I would have thought that a lot of the support schemes would have come from the Economy Minister. Can you apply to some the schemes set up for all businesses and others that have been set up with specific regard to some sectors?
Mrs Magill: I will answer that: no. Our people have not been able to avail themselves of anything other than the initial schemes. Some of those who had direct rates accounts got £10,000, and some got £25,000, but that accounted for only 6% of our membership. Most operators work out of serviced accommodation and serviced yards, which is how the world of business works, so that scheme did not help. We have already discussed the business interruption scheme, which precluded any of our members if they had applied for the bus and coach finance scheme. However, we have written to the Minister about future tourism schemes. There have been no specific schemes for the bus and coach industry that we have been able to apply for.
No doubt, some operators will be content with the scheme and with the award that they have got, perhaps businesses that do not have finance payments because they have a very different business model. They are content and have had the supplier relief through working with schools and key workers. I am not sure, and I cannot answer for that. In working with the industry for 20 years, I know the people I work with and every business intimately. Nobody at this point in time
that can move forward with the level of funding that they have received, because it does not take account of their future business finances.
The 2% figure is incorrect, and I highlighted that to the Department and the Minister. Six of our operators have been excluded from the £100,000 cap. Where the scheme might have said four, I have six. We took every vehicle owned by every operator and worked everything out on financial spreadsheets. That is how I know that I have six. Those people are the biggest investors. They employ the largest number of people — some employ more than 100 people. They are the biggest investors in fleet, the biggest employers and they make the biggest contribution to the local economy. Capping their award at £100,000 does not allow for their survival; it will hinder them. When we get up and running again and when Northern Ireland plc needs them, they will not be here, and neither will their workforce or their investment. Our association has £28 million worth of fleet, and that will be lost. One hundred thousand pounds might seem like a lot of money, but not to those who pay that every month in finance or have 100 employees; nor is it is a big amount when you look at the rates support. Look at hotels: some of them have £200,000 or £300,000 in support because of their rates holiday.
At the end of the day, this is about survival. We have to be realistic about the survival of an industry that is a major contributor to the local economy and helps to support local hidden gems, local restaurants, local hotels and the big attractions. If you look at the number of coach tours to the Titanic, you see that the industry is a vital part of the Northern Ireland transport mix and vital to our economy.
Mrs D Kelly: I do not think, Karen, that anyone disputes the contribution that the industry makes to the tourism and hospitality sector. For clarification, in response to an earlier question about furlough and some of the finance schemes, the phrase about no double funding was used when talking about, I think, part B of one of the COVID schemes. I think that it was you, John, who said something about that. Does that mean that, if there are a couple of schemes available to people, they have to choose which one to apply to, because they cannot apply for both and get double funding? I am sure that everyone understands that Ministers have to be guardians of the public purse and provide appropriate scrutiny, accountability and audit mechanisms. For clarity, what was the double funding point?
Mr Jeffers: That point came from the Department in our initial talks and negotiations with it. That was one of the things that it robustly set out at the start. Bear it in mind that — I will not go into individual cases — in a number of historic cases, money was paid to people who should not have been paid. There was also double funding, among other things. That is why the Department is probably being overcautious with this scheme. It is doing an audit before it pays any money. It is mindful of operators having had the £10,000 or £25,000 grants, so those figures need to be in the application that the Department receives. We accepted that.
What has not been mentioned is that all bus operators — Karen spoke about how bus companies operate — have an operating licence issued by the Department that is funding this. The most important thing that operators in Northern Ireland work to is "repute": if they lose their repute, they cannot operate. They are not going to put their business in jeopardy by applying for double funding or applying for more than, they think, they will get. That is probably the easiest way of putting it.
Back to the original point about double funding: the Department introduced that key phrase into the process.
Mrs D Kelly: It was my understanding that there were early discussions, before the scheme was developed, about the evidence for the scheme and where the gaps were in the overall package of schemes from Finance and Economy and that that information was presented by you or your representatives. What you are saying is that, now that that has been worked through, you have discovered further gaps and that is what you are now looking to have fixed. Is that —?
Mr Jeffers: Sorry. Yes. We put forward proposals, as did Karen. The Department put some of Karen's proposals and some of ours together and then introduced some of its own ideas. That is where it got the 40% figure. That is where it got the idea of this being based on loss and not on profitability, which someone mentioned earlier. There was a loss of profitability and a loss of turnover.
Some operators had invoices written before that first six-month period, so the money came in from March to September, and it therefore looked like a false income, because the work had already been done. There are a lot of smaller intricacies when you get down to the bones of it. One of the things that we are asking for in the new scheme is a robust appeals process so that we are allowed to talk retrospectively about the last scheme, as well as the one being proposed, simply because we have identified so many operators who have fallen just below the threshold and some operators for whom the 40% cap has cost them maybe £10,000. There is still a lot to be done. Hopefully, we have about eight weeks. Having open-ended conversations with the Department twice a week that are not time-constrained by an hour's Zoom meeting would be very helpful and much appreciated.
The Chairperson (Miss McIlveen): I want to thank everyone for their attendance this morning. It was a useful session and has certainly raised issues that the Committee can follow up on. Thank you all for attending.