Belfast Telegraph

John Simpson: Translink's books close to balanced after extra funds

Analysis

'Translink’s financial performance should not only be assessed in terms of conventional accounting'
'Translink’s financial performance should not only be assessed in terms of conventional accounting'
John Simpson

By John Simpson

In its most recent financial year to March 2019, Translink did not quite balance the books. In the conventional accounts, Translink earned £238m and after deduction of expenditure showed a trading loss of £19.5m. Balance sheet financial reserves fell by £30m.

Translink's financial performance should not only be assessed in terms of conventional accounting. At first reading, a trading loss of £19.5m might be assessed by asking whether this is a trading loss that should, and could, be eliminated with improved efficiency or higher fares. That question, in terms of both the public service obligations and its relations with the taxpayer, is inadequate.

Translink has a complex relationship with Stormont. Fare paying passengers and the compensated value of passengers carried for free (or with reduced fares) raised £196m. This excludes financial support to finance a railway and bus Public Service Obligation worth £36m in 2018-19.

Adjusted for these supplementary revenue sources, the trading loss would be nearer to £56m.

In an assessment of the financing of Translink the critical baseline must be not only whether the organisation trades profitably, but whether the justifiable scale of the costs of providing public services (expected to be loss-making) are within financing limits that Stormont should impose, reflecting a balance between cost to the taxpayer and the estimated social value of these services. Translink should be judged also as a social enterprise.

If that dichotomy is accepted the important financial performance information is not available from conventional accounts unless these are accompanied by a sensible adjustment to reflect both the conventional results and, in parallel, results reflecting the impact of Stormont contributions.

The need for this parallel assessment is clear in the published annual report. It acknowledges that annual financial planning for Translink should be based on the planned scale of Stormont financial support. Some of the key figures in the annual report are the several financial flows determined by the minister (or currently the Permanent Secretary) in the background to the conventional accounts.

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The supplementary financial flows which must be assessed in a wider examination of the social purposes of Translink's services include the cost of:

  • concession fares: the bus and rail passes
  • the public service obligation for both bus and rail
  • the (selectively applied) bus route subsidy
  • capital grants to purchase new trains and buses
  • capital grants to maintain equipment and the railway infrastructure

Stormont, for social reasons, gives Translink nearly all the capital costs, allows about one third of passengers to travel free of charge and then the public audit asks whether the trading performance is acceptable.

That is not easily or explicitly emphasised in the annual report.

A further complication lies in the financing of the costs of the defined benefit pension scheme for many employees, operated mainly through NILGOS pension funds.

Admittedly this is an indirect liability which imposes no immediate cost but, as a trading organisation, Translink must take note of the accumulated estimated deficit of £230m at March 31, 2019.

This varies from year to year but is £29m higher than a year ago.

The Translink annual report focuses mainly on current operational details. There are other major long-term questions which merit scrutiny.

As public policy on gaseous emissions intensifies, there is now a growing challenge for organisations like Translink to report on their efforts to reduce carbon emissions.

Setting 'net zero' targets will bring large spending requirements, affecting the whole rail and bus infrastructure and affecting fuel and energy sources which may cost as much as £3bn over approximately a 20-year period.

More immediately, anticipating a no-deal Brexit outcome, Translink has registered its business in Dublin to ensure continuity of cross-border services and their Irish regulation.

Translink is aware that it is facing continuing large-scale planning and financing problems.

The Belfast Transport hub plans look well.

Rail and bus emissions reductions are unavoidable. The price tag is off-putting. Tomorrow, tomorrow.

Belfast Telegraph

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