Date: 18 September 2013
Reference: NIA 80/11-15
Mandate Number: Mandate 2011/15 Fifth Report
Committee: Regional Development
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1. The Committee for Regional Development (the Committee) has expressed their long-standing concerns with regards to transport structures in Northern Ireland. This has principally emanated from a complete absence of transparency in the case of the Northern Ireland Transport Holding Company (NITHC) operating under its brand name of Translink and averseness by the Department of Regional Development (DRD) to allow Translink to be effectively challenged and scrutinised by the Committee.
2. In undertaking the inquiry, the Committee hoped that it might unravel some of the common misunderstandings around the governance of NITHC/Translink, in particular with regard to its relationship with the Department and in the operation of the three subsidiary companies. Additionally, the Committee wished to see whether these structures were “fit-for-purpose” in delivering modern, integrated and efficient transport services to the Northern Ireland public.
3. Significantly, the conclusion reached by the Committee does not match the aspirations expressed at the outset of the inquiry. The Committee believes that the relationship between the Department and NITHC/Translink, often described by Members of the Committee as “cosy”, is not sufficiently challenging due to the departmental governance model and the absence of relevant and key experience and expertise within the Department. Although outside of the Committee inquiry, Members have received a recent presentation on the proposal to enter into an “agreement” in order to meet the requirements of EU Regulation 1370/2007. Members are not content that the proposed service level agreement meets with the requirement for a Public Service Contract defined in the regulations and that this could leave the Department open to infraction proceedings.
4. In its report on integrated transport,1 the Committee stated that they believed the Department’s decision not to proceed with the agreed independent agency model opportunity “significantly diluted” the potential for an “…more coordinated, integrated and functional transport model”. The Committee reaffirms this belief and is content that the Transport NI model is not the most appropriate structure and does not achieve the objectives espoused during the public transport reform process or in the Outline Business Case published by the Department. The Committee is not content that Transport NI has the expertise, skills or experience to direct NITHC/Translink or champion public transport. The Committee notes in recent correspondence from the Department2 that it proposes to “…procure an expert transport modelling and planning service” to aid in the development of local transport plans. The Committee believes that this is too narrow and will not address the dearth of skills, expertise and experience within Transport NI
5. The Committee does not believe that the levels of departmental scrutiny applied on NITHC/Translink to be sufficient, particularly given the amounts of capital grants and subsidy that are provided from the public purse. The Committee has noted that NITHC/Translink accounts are audited by external auditors, as required under the Companies Act. However, NITHC/Translink accounts are not open to scrutiny by the Northern Ireland Audit Office (NIAO) despite being in receipt of very significant levels of investment. The Committee believes this to be a significant weakness.
6. At its meeting on 10 October 2012, the Northern Ireland Assembly’s Committee for Regional Development agreed to commence an inquiry into Comprehensive Transport Delivery Structures.
7. The Terms of Reference for the Report were agreed as follows:
- To assess the current legal status of the Northern Ireland Transport Holding Company and its relationship with the Department for Regional Development;
- To undertake a comparative analysis of the costs and subsidies to maintain the current and future public transport infrastructure and service delivery in the UK and Republic of Ireland;
- To compare the policy objectives for provision of public transport in the UK, Republic of Ireland and in Europe;
- To assess whether current structures and Transport NI proposals are the best suited for the efficient and effective delivery of public transport legislative and policy objectives; and
- To optimise the organisational and delivery structures to improve the efficiency and effectiveness of service delivery
8. On the 12 November 2012 the Committee inserted signposts in the Belfast Telegraph, Irish News and News Letter seeking written evidence on the Inquiry by 18 January 2013. The Committee also wrote to key stakeholders with the same request.
9. During the period covered by this Report the Committee considered written submissions from in excess of 15 individuals and organisations. A copy of submissions received is included at Appendix 3.
10. The Committee also heard oral evidence at meetings between the 10 April 2013 and 8 May 2013 from the following organisations:
- The Department for Regional Development
- The Northern Ireland Transport Holding Company/Translink
- Community Transport Association
- Professor Austin Smyth
- The Office of Fair Trading
- The Consumer Council for Northern Ireland
- The Transport Planning Society
- The Transport Salaried Staffs’ Association
- The Northern Ireland Transport Working Group
- Belfast Taxis Community Interest Company
11. The relevant extracts from the Minutes of Proceedings are included at Appendix 1. Minutes of the evidence extracts are included at Appendix 2. The Committee would wish to thank all those who provided both written and oral evidence.
12. Whilst the Committee did not undertake any Study visits specifically in respect of this inquiry, those undertaken during the earlier Inquiry into the Better Use of Public and Community Sector Funds for the Delivery of Bus Transport in Northern Ireland helped inform Members of the potential structures in place elsewhere. The Committee would wish to thank all those who provided presentations and tours during the study trips.
Summary of Recommendations
13. The Committee recommends that the Minister and the Department reverts to the agreed agency model as described during the public transport reform process and as presented to the Northern Ireland Assembly and the previous Committee for Regional Development during the passing of the Transport Act (Northern Ireland) 2011. This would rectify the conflicting anomaly whereby the Minister is the public owner, policy maker and part regulator of public transport.
14. The Committee recommends that the Department invests in recruitment of appropriately qualified and experienced personnel as championed in the revised Outline Business Case.
15. The Committee recommends the Department undertakes an urgent and extensive review of its future budget allocations to ensure that a more proportional apportionment is made between the roads infrastructural budget and that of public transport.
16. The Committee recommends that the Department proactively introduce tendering and franchising opportunities for private operators in delivering the public transport requirement. This should include Belfast Rapid Transit and existing network bundles.
17. The Committee recommends that the Department offer a short term contract in order to allow for the development of transport bundles based on local transport plans. These bundles should then be offered to the market for tender and/or franchise opportunities.
18. The Committee recommends that the Minister commissions an urgent and fundamental review of the NITHC structures against requirements of existing and developing EU transport regulations, Programme for Government (PfG) and the Investment Strategy for Northern Ireland (ISNI) commitments and “Ensuring a Sustainable Transport Future - A New Approach to Regional Transportation” to ensure that it is the most efficient and effective model to meet the future Northern Ireland public transport requirements.
19. The Committee recommends that, as an additional layer of scrutiny, the Group Chief Executive and Chief Operating Officer cease to be full members of the Board of NITHC, instead leaving themselves accountable to the Board for operational matters.
20. The Committee also recommends that, given the significant levels of public grant and subsidy to NITHC/Translink, the Minister assess what legislative considerations need to be put in place to allow the NIAO full access to NITHC accounts and those of the three subsidiary companies. Members would also indicate that, in the event the Minister and the Department decline to put in statute the necessary powers to allow this access, the Committee will bring forward the appropriate legislation themselves.
Departmental Structures and budget implications
21. In November 2009, the Department published its consultation document into public transport reform.3 In this, the Department highlighted its vision for the future of public transport:
“The provision of a customer-focused, high quality integrated public transport system, which is sustainable, provides good value for money, enhances competitiveness, helps sustain economic growth, promotes regional development and contributes to equality and social inclusion”.
22. The overall policy objectives of these public transport reforms were to deliver a public transport system that:
- Supported the implementation of the Regional Transportation Strategy, enabling the maximum possible integration of an effectively regulated public transport network;
- Provided safe, efficient and high quality public transport services;
- Complies with EU regulations, with contractual and funding arrangements that provide incentives to deliver an efficient, customer-focused and continually improving public transport service;
- Encouraged the greater use of public transport in support of the Executive’s economic, social, equality and sustainability objectives; and
- Maximised efficiency and value for money through the use of benchmarking, continuous improvement of services and, where necessary, competitive tendering for some transport services.
23. This was to be achieved through the establishment of an executive agency within DRD, a model that, at the time, was considered fundamental to the success of public transport reform proposals. The Outline Business Case for public transport reform stated that the agency would result in benefits such as efficiency and improved service. It envisaged “A single client body with expertise in the specification of integrated transport services and facilities, and in procurement and contract management…” as a means of achieving and sustaining “…the best possible value for money over the long term”.4
24. The Department emphasised that it would be an independent body that would bring together stakeholders. Importantly, the proposed agency model was consulted on and agreed to by the previous Minister, the Department and the key stakeholders.
25. The Transport Act (Northern Ireland) 2011 received Royal Assent in 16 March 2011. Whilst this did not refer to the proposed structures, it was passed through the Northern Ireland Assembly and the previous Committee on the basis that the functions being legislated on would be carried out, where applicable, by the Executive Agency. Giving evidence during the Committee Stage of the Bill5, a senior official from the Department indicated to the previous Committee that:
“The main new element in that structure is the agency, which will be a part of DRD and will be responsible to the Minister and the Assembly for the delivery of the proposed transport functions. It will not be a stand-alone body requiring separate administrative support services. It will not be a quango or arm’s-length body. It will rely on the new powers in the Transport Bill to perform many of its functions. However, the establishment of the agency does not need to be specified in legislation: it can be brought about by administrative action under the powers of the Departments (Northern Ireland) Order 1999”.
26. The official continued:
“We envisage that specialist transport and contracting skills will need to be developed in the agency as those do not exist at the moment because contracting is not in place.
“The benefits of the structure are in achieving the important separation of the responsibilities for design and setting requirements for public transport services from the operating organisations involved in the delivery of those services. Again, stakeholders attached a lot of importance to that clarity of role and function during the consultation phase. Therefore, there will be greater clarity of roles and responsibilities if the agency is part of the Department, rather than NITHCo, and representing the public interest in the provision of public transport services.
The agency will be directly accountable to the Minister and the Assembly. Its decisions on public transport will be taken in the context of wider transport policy developed in the Department. It will be able to contract for services and secure more joined-up services. It will also have the ability to direct NITHCo on certain commercial matters, and, importantly, it will be compliant with EC Regulation 1370/2007”.
27. The new structure imposed by the Minister combines the functions carried out by Roads Service and the newly acquired public transport authority functions. The reasons for this reversal have not been made clear to the Committee.
28. The new structure has not been consulted on and the Committee and key stakeholders were not invited to offer opinion on the structure. The Committee is concerned that the Minister and the Department implemented this considerable shift in departmental policy without appropriate consultation. The Committee is in agreement that the new Transport NI model falls significantly short of the proposed and agreed agency model. Having stressed the need for any new body to be independent, the Department has now implemented a model that fails to provide for the independence claimed by the agency model. In addition, the revised arrangements are not consistent with the goal of maximising the efficient and effective delivery of public transport legislative and policy objectives.
29. The Committee recommends, therefore, that the Minister and the Department reverts to the agreed agency model as described during the public transport reform process and as presented to the Northern Ireland Assembly and the previous Committee for Regional Development during the passing of the Transport Act (Northern Ireland) 2011. This would rectify the conflicting anomaly whereby the Minister is the public owner, policy maker and part regulator of public transport.
30. In addition, the new structure has limited specialists or expertise in the following areas:
- Local transport planning
- Contract specification
- Performance and contract management; or
- Fares regulation
31. The Committee wrote to the Department on 30 July 20136 asking that the Department identify the number of officers within Transport NI who possessed the skills, experience and expertise in respect of the above areas. In response7, the Department stated the following:
- Local transport planning - three officers had been involved in annual corporate and business planning with Translink, which involved negotiation over the provision of services, seven had been involved in the analysis of services provided through the Rural Transport Fund and two were involved in the integrated transport pilot in Dungannon;
- Contract Specification – four staff involved in agreeing performance indicators and the passenger charter with Translink, eight involved in developing specifications for the demand responsive services and Transport NI staff worked with Translink in developing the proposed service level agreement.
- Performance and contract management – six officials from the Public Transport Services Division (not Transport NI) have experience of managing the performance of Translink, the Rural Community Transport providers and the Rathlin Ferry contract.
- Fare Regulation – three staff with accounting experience have knowledge of high level fare analysis and associated financial matters.
32. The Committee holds a strong view that the above response is indicative of an absence of the skills-set envisaged in the agency model. The Committee notes that the Department intends to procure “…an expert transport modelling and planning service”. Whilst this is a positive, if somewhat late, move, the Committee still believes that a solid skills base is required within Transport NI in order to commission services from the procured organisation and to effectively challenge NITHC.
33. The Committee recommends that the Department invests in recruitment of appropriately qualified and experienced personnel as championed in the revised Outline Business Case.
34. The Committee is not convinced that a Division that continues to be branded as Roads Service can effectively champion public transport, particularly in light of future budget cuts. A number of witnesses commented on the imbalance between the roads infrastructure budget and that of public transport, currently proportioned at 80:20. This imbalance needs to the redressed urgently. The Committee is not content that the current Transport NI model will achieve this as, culturally and historically, their emphasis has been on the construction of roads.
35. The Committee recommends the Department undertakes an urgent and extensive review of its future budget allocations to ensure that a more proportional apportionment is made between the roads infrastructural budget and that of public transport.
NITHC/Translink Structures and budget implications
36. The Transport Act (Northern Ireland) 1967 established the Northern Ireland Transport Holding Company as a public authority charged with the delivery of public transport services. NITHC delivers on this responsibility through three subsidiary companies, Northern Ireland Rail, Citybus (branded as Metro) and Ulsterbus, under the overall brand name of Translink.
37. The Chairmanship of NITHC is a non-executive position appointed by Government and like the other Directors is appointed for a renewable term of 3 years. The Group Chief Executive and the Chief Operating Officer of the subsidiary companies are also a member of the NITHC Board.
38. According to the Translink website,8 the Board is “…responsible to the Department for Regional Development for the operation of its subsidiary companies, Citybus, NI Railways and Ulsterbus, which deliver public transport services. Its role is to approve the strategic direction of the operating companies and ensure their property governance. It also owns a portfolio investment throughout the Group”.
39. As required by the Transport Act (NI) 1967 the Minister, the Department and NITHC/Translink agree a broad framework under which NITHC/Translink operate. This is published in the Management Statement and Financial Memorandum (MSFM). The Management Statement includes:
- NITHC’s overall aims, objectives and targets in support of the Department’s wider strategic aims and the outcomes and targets contained in its current Public Service Agreement (PSA);
- the rules and guidelines relevant to the exercise of NITHC’s functions, duties and powers;
- the conditions under which any public funds are paid to NITHC; and
- How NITHC is to be held to account for its performance.
40. The associated Financial Memorandum sets out in greater detail certain aspects of the financial provisions which NITHC is required to observe.9
41. Whilst the MSFM is reported on and monitored by the Department, this monitoring is limited to an assessment of performance against the Key Performance Targets (KPI’s), including some financial targets. However, NITHC/Translink, as a public sector monopoly, maintains a significant level of independence.
42. The Transport Act (Northern Ireland) further protected the NITHC/Translink position as a monopoly, ensuring that it would deliver “most” of the public transport requirement. This was presented as a defence by departmental officials on a number of occasions during the inquiry and in subsequent evidence sessions on the proposed new contract to Translink, namely that the previous Committee and the House had passed the Transport Act (Northern Ireland) 2011. However, as previously stated, Members voted this Act through on the basis that an independent agency would be in place to ensure appropriate segregation to avoid the situation where the Minister is the public owner, policy maker and part regulator of public transport.
43. In addition, the 1967 Act stipulates that the “majority” of services are to be provided through the NITHC/Translink model, a concept endorsed by the 2011 Act which allows for new service delivery arrangements to contract with “public transport operators”. The Committee is supportive of the potential for competition as embraced by the 2011 Act. However, the Committee is gravely concerned that the Department is only paying lip-service to this element of the Act, a view supported by the Department’s intention to award a 10-year contract for public transport services and the contract for the Belfast Rapid Transit system automatically to Translink without any formal testing of the market.
44. Whilst the introduction of competition and the award of exclusive contracts can result in higher regulatory costs, the Departments own strategic business case10 states that:
“…the introduction of competition has also resulted in significant operating savings and increased service levels. Research conducted for the European Commission suggests that the introduction of competition can generate cost savings of 10 – 20% when only minimal restructuring of the industry is required. Savings of 35 % or more have been achieved where greater restructuring was required”.
45. Over the last 20 years EU member states have had to adapt and reform their transport governance arrangements in order to comply with various EU regulations which have sought to:
- liberalise the public transport market;
- encourage competition;
- attract public sector involvement; and ultimately
- improve services for citizens while lowering costs to government11
46. During oral evidence sessions, Professor Austin Smyth, Director of the Centre for Sustainable Communities at the University of Hertfordshire, stated:
“Translink could operate a franchise. In fact, there are various models of that sort throughout Europe. You could split the whole managerial side from the delivery side. You could have all sorts of possible combinations, and various countries have implemented those things.
“A franchise is what applies to the Luas tram system in Dublin, and it is very effective. People do not see it as a private sector operation. It has been run by Veolia for a period. That contract was won under competitive tender, with the specifications for quality of service s et out by the state, not by the private operator. Therefore, it is all perfectly possible to do that”.12
47. An analysis of other European models would support the introduction of limited competition through the franchise model. An examination of the process of reform across a number of member states indicate that a number of common issues and themes have arisen:
- To comply with EU regulations the regions considered have shifted from largely nationalised transport model where government (national/regional/local) owned and operated transport services to a quasi-nationalised franchising model whereby a relevant public authority retains control but contracts routes to private sector companies;
- Among the cases of public transport reform considered the tendency has been to form an autonomous transport authority, overseen by government, to take control of transport issues such as policy development and local planning. The main advantages of these autonomous bodies appears to be based on their focus and expertise in transport planning which have led to innovative services, increased patronage and lower costs to the transport authority;
- While government takes the lead in policy, planning and financing there is a growing trend to involve local stakeholders. Regional bodies made up of representatives from regional and local government, transport operators, local business and consumer groups have been set up across GB and the EU with the literature suggesting that these regional structures are a common characteristic of all successful transport systems;
- Regulated competition through competitive tendering enables transport authorities to set parameters in which tenders must operate. This enables transport authorities to monitor and control important operational issues such as fare levels; integration; and customer satisfaction.13
48. The Prime Minister, writing in the Daily Telegraph on Tuesday 17 September about a White Paper on public reform, stated:
“We will create a new presumption – backed up by new rights for public service users and a new system of independent adjudication – that public services should be open to a range of providers competing to offer a better service”.
49. The Committee recommends, therefore, that the Department proactively introduce tendering and franchising opportunities for private operators in delivering the public transport requirement. This should include Belfast Rapid Transit and existing network bundles.
50. The Committee is opposed to the awarding of a 10-year contract to Translink on the basis that it discourages competition, removes the potential for incentivisation and reduces innovation on behalf of the current provider.
51. The Committee recommends that the Department offer a short term contract in order to allow for the development of transport bundles based on local transport plans. These bundles should then be offered to the market for tender and/or franchise opportunities.
52. The Committee is not content that the current NITHC structure is fit for purpose in delivering a modern, integrated public transport service. Conclusions formed during the public transport reform process indicated that there was a distinct lack of clarity with regards to the NITHC relationship with the Department and its relationship with its three subsidiary companies and its other commercial concerns. These still exist despite the Committees best efforts to encourage greater transparency.
53. The Committee is concerned that the Group Chief Executive and Chief Operating Officers both sit as Board members. In addition, the Committee is very concerned that, despite very significant investment since devolution in 2007, the Northern Ireland Audit Office (NIAO) does not appear to have access to NITHC/Translink accounts or those of the subsidiary companies.
54. The Committee recommends, therefore, that the Minister commissions an urgent and fundamental review of the NITHC structures against requirements of existing and developing EU transport regulations, Programme for Government (PfG) and the Investment Strategy for Northern Ireland (ISNI) commitments and “Ensuring a Sustainable Transport Future - A New Approach to Regional Transportation” to ensure that it is the most efficient and effective model to meet the future Northern Ireland public transport requirements.
55. The Committee recommends that, as an additional layer of scrutiny, the Group Chief Executive and Chief Operating Officer cease to be full members of the Board of NITHC, instead leaving themselves accountable to the Board for operational matters.
56. The Committee also recommends that, given the significant levels of public grant and subsidy to NITHC/Translink, the Minister assess what legislative considerations need to be put in place to allow the NIAO full access to NITHC accounts and those of the three subsidiary companies. Members would also indicate that, in the event the Minister and the Department decline to put in statute the necessary powers to allow this access, the Committee will bring forward the appropriate legislation themselves.
1 NIA 65/11- Inquiry into the Better Use of Public and Community Sector Funds for the Delivery of Bus Transport in Northern Ireland
2 SUB 663/2013
3 Public Transport Reform Consultation: Summary Document
4 Professor Austin Smyth, written submission to the Committee for Regional Development, January 2013 and McClure Waters (2009) Outline Business Case for Public Transport Reform. DRD: Belfast [online] available from: http://nia1.me/10e
5 Official Report (Hansard) Transport Bill, 8 September 2011
6 DALO 27/2/2013
7 SUB 663/2013
9 NIAR 602 – 12, Public Transport Reform
10 Strategic Business Case, Public Transport Reform, May 2008 Strategic Business Case, Public Transport Reform, May 2008
11 NIAR 103 – 13, Local Transport Governance
12 Briefing from Prof Austin Smyth, Hansard 8 May 2013
13 NIAR 103 – 13, Local Transport Governance