Bus ticket prices may rise despite Translink's 65% hike in profits
Published 29/06/2013 | 08:00
Translink bus fares could go up again next year, the company's chief executive has said – just one day after it announced close to a doubling of pre-tax profits.
The public corporation, which relies on funding from the Department for Regional Development, this week announced a 97% jump in pre-tax profits from £6.5m to £12.8m.
After stripping out pension deductions and a one-off payment of £4.3m after lands were sold to Roads Service, profits had grown by £2.9m to £4.8m – an increase of 65%.
At the end of April, the company introduced an average 3% rise across its bus fares and a 5% increase in rail fares to the consternation of passengers already struggling with salary freezes and rises in the cost of living.
Speaking on Radio Ulster last night, Translink chief executive Catherine Mason (below) said 2014 could see an increase in bus fares, though rail fares would be held until January 2015.
"We will be looking again at putting bus fares up, but no more than at the rate of inflation," she said.
She defended the prospect of a fresh increase coming after it emerged that the business had £60m in the bank.
"At any time we might face bills of £50m.
"We have to pay our employees and cover off the fact that public funding is reducing."
DUP MLA Jimmy Spratt, chairman of Stormont's regional development committee, said he had sent the 2012-13 accounts for Translink to the Assembly finance research unit for scrutiny, ahead of Translink's appearance before the committee on July 10.
Mr Spratt said: "Profits should be used to keep fares down, but history doesn't reflect that."
Alliance Party MLA and commitee member Stewart Dickson said: "I find it exceptionally disappointing that a fare increase has been announced in advance of a meeting of our committee to discuss their accounts.
"If Ms Mason is putting fares up she could have waited to speak to the committee. Certainly given the high profits, this is exceptionally disappointing.
"It will make Translink's explanation of their profits all the more interesting to us."
The average Translink revenue per fare of £1.75 across rail and bus is subsidised by Government at around £1.85, according to economist John Simpson.
Mr Dickson said the profit would "cause a great deal of concern among the travelling public".
He said there should be questions over the future of Translink's public sector pension scheme, and said future employees of Translink – for example, those to be employed on the Belfast Rapid Transit scheme – should not be automatically enrolled on to the expensive scheme.
He said he would not be in favour of privatisation of public transport as it would mean less profitable routes would be cut.
"Translink is entitled to make a profit but they are not entitled to make a profit at the expense of the public after putting fares up.
"If it became solely run by the private sector my suspicion would be that more and more rural services would be withdrawn.
"In reality, Metro and Goldline are profitable but many of the country services would not be.
"But what should be done is to make the business a great deal more transparent to the travelling public and to us, as the parliamentary oversight body," Mr Dickson added.
STORY SO FAR
Translink's annual report for 2012-13 revealed that its pre-tax profits jumped 97% from £6.5m in 2011-12 to £12.8m in 2012-13. When it deducts pension contributions, the figure for pre-tax profits is £9.1m which includes £4.3m gained from the sale of land close to Great Victoria Street Station to Roads Service, but the remaining £4.8m is still an increase of 65% on the £2.9m made a year earlier.
Understanding firm's books not an exact science
By John Simpson
The annual accounts of Translink show that the publicly-operated rail and bus services earned revenue of £200m in the year 2012-13, up by 6% on the previous year.
Passenger numbers rose by nearly 1.5% and operating costs increased by 3.5%, leaving a small trading profit. Fares and other commercial revenue accounted for £138m of the total.
A further £62m was earned by Translink, first, as a public service obligation of £24m to assist the current financing of the railway, and, second, a supplement of £38m as compensation to Translink to offset the costs of people travelling on concession fares (mainly the bus and rail passes for older passengers).
Interpreting the accounts to assess the degree of commercial success of Translink is difficult.
The pro-forma accounts – the balance sheets before they have been audited – show a profit before tax of £4.8m after excluding revenue of £4.3m from the sale of land to the Roads Service.
These pro-forma accounts exclude some of the required adjustments caused by the financing of contributions to the pension scheme.
The statutory accounts show pre-tax profits of £12.8m, including the one-off revenue from land sales of £4.3m.
Depending on which concept is used, pre-tax profits on a statutory basis increased by £2m (excluding the land sales exceptional extra) or 31%; or on a comparable pro-forma basis, by 65%.
Translink tries to balance its businesses so that fare increases are minimised while at the same time, the overall operations do slightly better than break even.
In that regard, Translink has modestly succeeded. However, if the operating profits are assessed after stripping out the degree of Government support, the picture changes. Indeed, there are different cash and accounting measures that call for careful interpretation.
On commercial revenue of £138m, operating and administrative costs were £196m. This apparent deficit of £58m makes no large provision for capital replacement, or depreciation, since the main capital assets are grant-aided by Government.
The Translink report reflects a significant degree of self-congratulation by the board. Fare increases have been kept lower than elsewhere.
Nevertheless, from a taxpayer perspective, in 2012-13 Translink was allocated £146m from the Government: £79m to supplement current revenue and £67m to pay for capital investment.
A bank balance of £60m at the year-end may seem large but will be very variable according to the changing financial demands on the organisation.
Translink has been performing credibly. Its performance should now be put on a more formal agenda base.
The recent specious criticisms must be replaced by relevant objective criteria. Nevertheless, the scale of Government funding should be programmed to reduce rather than increase.