Children in Dublin used to have a skipping rhyme that began with the line: "You'll never get to heaven on CIE." From the anguish evident in the resignation letter of the company's chairman, Brian Joyce, this week, however, it would seem that CIE can put its bosses on the road to management hell.

Stepping out of the vicious circle that is CIE's relationship with Government, Brian Joyce presented Mary O'Rourke with a vision of every manager's worst nightmare, responsibility without power. The picture he drew is one that should make anyone offered the chairman's job recoil in horror.

Brian Joyce raised three specific areas in which CIE suffers from a strange mixture of neglect and interference on the part of the Government. The interference operates on two fronts, intervention in industrial relations disputes and a refusal to allow CIE to increase fares in line with inflation. The neglect lies in the failure to implement a rational system of subsidy whereby CIE companies would be contracted by the Government to provide certain social services and paid accordingly.

There is little doubt that these complaints are largely justified. Industrial relations at CIE have been poisoned by the tacit assumption of a low-wage regime that is built into the low levels of State subsidy. Yet, when the bitterness induced by bad pay erupts in strikes that threaten vital public transport services, governments have tended to exert pressure on the company to make settlements.

The cost implications of those settlements, however, are then seen as a matter for CIE management to deal with. But the obvious way to do so, raising fares, has been vetoed by successive governments. Between 1991 and the 1999 the State refused to sanction any increase in Dublin Bus fares. This might well be a logical political decision, bearing in mind the social factors involved. Yet governments have also refused to follow that logic and compensate the company with State funds.

Throughout the 1980s and 1990s, indeed, the State actually wound down its subsidy to Dublin Bus without ever explaining why it was doing so and what the broader implications were. If the annual State subvention to Dublin Bus had merely kept pace with inflation since 1990, it would, by 1997, have been £21 million. It was in fact £7 million, even though passenger numbers had risen by 10 per cent in that period.

Nor has Government policy on subvention even been internally consistent. It is possible to imagine a coherent case for refusing State subsidy to public transport. But what we have had instead are wildly different levels of subsidy even to different companies within the CIE group.

Iarnrod Eireann gets half of its costs from the Government. Dublin Bus gets just 4 per cent of its costs. Why one set of CIE services should get hefty subvention while another has to virtually pay its own way is anyone's guess.

Brian Joyce's demand for public service contracts, moreover, has a broad political consensus behind it. Last year the Joint Oireachtas Committee on Public Enterprise and Transport, in a searching and intelligent report on public transport, strongly recommended that Dublin Bus should get 20 per cent of its costs paid by the State "under a regime of public transport service contracts with specific performance criteria specified".

All of this might seem to be an argument for cutting the link between CIE and the State altogether by privatising public transport and letting market forces decide its fate. But, aside from a few ideological dogmatists, few people who think about the subject can really believe that this is a solution.

Privatisation of the railways in Britain has been a disaster, creating confusion for the traveller without significantly enhancing the service and contributing to the collapse of a culture which placed safety before profit. Just this week the Irish party most sympathetic to privatisation of State enterprises, the Progressive Democrats, quietly acknowledged that the case for taking Iarnrod Eireann out of public ownership was very weak.

"The rail network," it said in a draft transport policy document issued on Tuesday, "is a strategic national asset, and there may be a strong case for retaining it under public control."

Nor, when it comes to urban bus services, is the Thatcherite privatisation model any more inspiring. In the first flush of deregulation of bus services in Britain, there was indeed fierce competition between rival operators, each seeking to woo customers.

But within a few years the most efficient operators had forced their rivals out of business, leading effectively to the replacement of a public monopoly with a series of less accountable private monopolies. Again, it is notable that even the PDs, in their transport document this week, do not propose to deregulate bus services, merely to regulate them differently through a publicly managed system of competitive tenders for individual routes.

Irish conditions, moreover, are even less favourable to running public transport as a purely commercial enterprise than those in Britain. Our population density is so low - 53 people per square kilometre compared to 243 in the UK - that market forces would soon ensure that people beyond the eastern seaboard and off main routes would be isolated and badly served.

In any case, one of the biggest problems for CIE is not that it is tied to the State but that the State lacks a strategy. Even while interfering in small details, the Government has failed to do the much more important job of integrating transport policy into overall national development. Much of the potential for waste and inefficiency arises, indeed, from a severe shortage of State policy.

Iarnrod Eireann, for example, is currently investing £126 million in upgrading the infrastructure for rail freight services, and Mary O'Rourke seems to have no problem with this expenditure. But rail freight is a business in long-term decline, and it is by no means obvious that this kind of investment is a rational use of resources.

The Joint Oireachtas Committee asked that "at the very least . . . any sizeable investment in rail freight be accompanied by a strategic analysis of the freight sector in Ireland". Yet while every penny of State money spent on vital urban bus services has to be squeezed out of an unwilling Government, that Government has been willing to sanction massive spending on rail freight before undertaking this kind of basic analysis.

This story is repeated in virtually every aspect of CIE's operations where the development of public transport is proceeding in a policy vacuum. It would seem obvious, for example, that before investing £431 million in Iarnrod Eireann between 1999 and 2005, the Government would have worked out a national spatial strategy which included a picture of where development would take place and where commuters would be travelling to and from. But the spatial strategy is only now being undertaken.

Equally, in Dublin, it would seem rational to plan bus and rail services on the basis of a broader urban planning strategy. Instead, CIE has to operate on the basis on hunches and guesswork, creating a situation in which, as the Joint Oireachtas Committee put it, "taxpayers' money could be misused by being spent on facilitating new development in areas where little or no public transport infrastructure exists or where providing it would be extremely expensive afterwards".

Until Mary O'Rourke and her fellow Ministers begin to do their job in these areas, Brian Joyce's successor will be undertaking an impossible journey.