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An Post…and Bus Éireann: Bus Stop… redux March 21, 2017

Posted by WorldbyStorm in Uncategorized.
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Stephen Kinsella wrote in the SBP a few weeks back that Bus Éireann should be let ‘go to the wall’. The weekend before last he wrote:

Sixteen years of data convinced me the organisation did not deserve the taxpayers largesse. Bus Éireann did not pass a simple test: should the state intervene to save it?

Actually, that’s not a simple test, it’s a question. And if there’s a test in there it may be a a little more complex than the answer to that question, or rather there may be many answers to that question because it is contingent on many other things. And tellingly he continues:

Competition, not austerity, had sunk its fortunes. Its highly-paid management should be fired, and its staff reassigned or made redundant.

Moreover:

Take the public service obligation routes and school bus businesses into the state proper, or put them out to more than 8,000 privately contracted buses, and let the workers find alternative employment. A harsh call, to be sure but neither blithe, nor driven by ideology.

But that is driven precisely by ideology – just as the fact that competition ate into BÉ routes was driven by ideology. A ‘market’ was allowed to develop where BÉ had to compete against private operators. None of this is an argument for BÉ not providing the best possible service to passengers – but that is a different issue.

Anyhow, Kinsella continues:

Another semi-state faces exactly the same problem this week. The public policy disaster du jour is An Post. The question – should the state intervene – is the same as it was two weeks ago. And here the facts are entirely different.

Not only should An Post see the government reaffirm its commitment to a public mail and financial services network, that commitment should be expanded and regulations holding An Post back should be removed.

And he argues that it is because he has ‘looked at the facts’ that he has two different views on An Post and BÉ.

Despite it being in the red ‘An Post receives no direct subsidy form the state. Recall that BÉ gets at least two. An post has been self-financing since 1986’. Except it hasn’t. ‘It received a bail-out once, of €12.7m in 2003’. He argues though that that is dwarfed by the €500m BÉ received by the state since 2000. And while post is down by a quarter since 2004 he still argues for the retention of An Post.

Why so?

Because in part it was created as a semi-state in 1984 (or rather rebranded as such) and ‘like all semi-states AP’s challenge is to prosper commercially while simultaneously achieving politically determined ends. AP is mandated… to perform a universal serve obligation – everyone gets their letters delivered five times a week with next-day delivery as standard’.

But he also notes that:

A series of market liberalisation directive from the EU in 1999 and 2006 allowed much more competition for the postal service. Since 2011 the market has been fully liberalised. APs competitors are not mandated to deliver with the same frequency, nor are they forced to maintain loss-making businesses for political purposes. Remember that companies like BÉ get subsidies from the state for precisely this reason.

What’s staggering is that AP has survived given all this, and he notes that it accounts for just 30-40% of volume in its product space.

Anyhow, looking at productivity and new products and services he sees nothing but good despite few of these taking fully. Turnover too is healthy. Capital employed and return on sales likewise. So he figures that on three grounds it ‘meets the test for intervention by the government’. Firstly because it ‘is a genuine anchor of rural development… 1,100 strong network is efficient and productive’, secondly because ‘it has historically priced itself lower than average for its services’, thirdly because it has demonstrated a willingness to diversify.

He argues further that next-day delivery should become a premium service, that other aspects of its should be deregulated and it should further ‘transform’. This he suggests ‘are just the facts, not ideology, not spin’.

But I think he falls into error in two very distinct ways. Firstly he reifies the semi-state aspect of AP in contrast to BÉ – the latter has very distinct functions, AP by contrast can diversify much more widely – though to relatively little effect. Moreover AP despite having competition does provide the only national letter delivery service door to door five days a week. Others might bite into some of that, but they can’t match it. Whereas BÉ has been forced to exist in a situation where competitor after competitor can enter its core market and cherry pick point to point routes.

I’m deeply sceptical of the vagueness of his proscriptions in relation to BÉ. Is he seriously suggesting that the school bus service should just be handed over to the private sector? And what of non-profitable routes BÉ still runs? Who precisely will run them? Why should the state divest itself of an entity that can run those to ones that probably won’t? Indeed why should the state have to sit back and accept competitive approaches that are eating into bus services in the first place? And if one looks at it in that light suddenly some of the very functions he lauds AP for are clearly also part of BÉ. But that can’t be right, because he’s being entirely unideological. Isn’t he?

He thinks judgements such as these exist above and beyond ideology, that in other words ideology only suffuses them if one approaches them with a pre-prepared ‘ideology’. He believes that because he’ll allow one company to continue and recommend another should go to the wall this confers upon him a sort of neutrality. But ideology suffuses everything. It shapes the perceptions and pre-conceptions he approaches these questions with. Even in attempting to shed himself of same he underlines precisely how immersed in them he is. And worse the yardsticks he applies are utterly enmeshed in ideological concepts – the weight placed on societal needs as distinct from purely financial ones, etc, etc. Above and beyond all else he seems unaware that societies will put money into areas which are of little apparent or immediate economic value. That sometimes other factors transcend the immediate or the not apparent.

These two threads here from previous months on the CLR engage with the nitty gritty of this issue from a variety of perspectives.

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Comments»

1. EWI - March 22, 2017

This codology from the Bus Éireann management about being immediately forced to slash and burn – because of a supposed need to avoid being prosecution for ‘reckless trading’ – represents a new and troubling tactic for the privateers who seem to be appointed there and elsewhere these days. And if they’re so worried about this, how did they allow it to develop to a stage where (or so they claim) the company is facing imminent insolvency?

It’s hard to escape the conclusion that these are manufactured crises, here and in An Post.

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