The ESRI has recommended that the bus market in Ireland be fully liberalised in an attempt to foster competition and enhance the quality of service to customers.
In a hard-hitting analysis written by former Competition Authority member Patrick Massey, now a director of economics consultancy Compecon, the ESRI outlines a number of proposals that the Government needs to introduce to improve bus services. These include carrying out a full audit of Dublin Bus and Bus Éireann services to identify commercial and public service obligation (PSO) routes.
It said PSO routes, which would be subsidised, should be put out to competitive tender, with these tenders being phased in over a five-year period.
In relation to new licences, it says that applications should be approved unless it can be shown that they would not be in the public interest.
The ESRI also recommends automatic approval of new licence applications for non-PSO routes where the operators commit to charging lower fares and/ or increase the frequency of a service for a minimum period of two to three years. This is to prevent predatory pricing by operators.
Mr Massey says performance-based contracts, which are used in Norway and New Zealand, should be considered.
The ESRI paper, which forms part of its latest quarterly economic commentary and is to be published today, finds that productivity in Dublin Bus has declined in recent years while the costs of services provided by the company and by Bus Éireann increased as a faster rate than revenues.
This has resulted in a higher subsidy being required from the exchequer, Mr Massey says.
At Dublin Bus, pay now represented 59.5 per cent of operating costs in 2005 compared with 52.4 per cent in 1998. Over the same period, the numbers employed by the semi-State company rose by 506.
At Bus Éireann, the operating deficit increased from €2.9 million in 1998 to €10 million in 2005.
"Both companies [ Dublin Bus and Bus Éireann] compare unfavourably with British operators in terms of operating costs and customer satisfaction," Mr Massey says.
The ESRI notes that reforms announced last September by Minister for Transport Martin Cullen, which allow for competitive tendering for new routes in Dublin city, are not radical enough.
Private operators will exclusively be permitted to tender for new services to a limit of 100 buses.
Any further new services will be subject to open tender.
Mr Massey says Dublin Bus would have an unfair advantage in any open tender process, given that it receives State funds for its fleet and could undercut rivals by using existing monopoly routes to subsidise new ones.
"Meaningful reform has been postponed yet again," the report states.
