The Scottish Government

This item was published during the term of a previous administration that ended in April 2007

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Future Of Highlands And Islands Ferry Services Secured

27/04/2000

Transport Minister Sarah Boyack today announced proposals and options for the future of Caledonian MacBrayne's ferry service network to ensure modern, reliable services at affordable fares which are compatible with European law.

The Executive will be amending current arrangements in the light of EC requirements but will continue to subsidise the current ferry network and

will ensure fares and levels of service are protected. Caledonian MacBrayne will remain very firmly in public ownership.

Announcing the launch of the consultation paper Delivering Lifeline Ferry Services - Meeting European Union Requirements, to the Scottish Parliament today, Sarah Boyack said:

"Following the introduction of EC guidelines on State Aids to maritime transport, the Executive is required to ensure that current arrangements for Caledonian MacBrayne ferry services are compatible with EC law.

"It is clear that we must comply with Community law, including the rules on State aids in the maritime sector. Failure to comply is not an option for the Executive. However, I am determined to have proper consultation on the implications of meeting the requirements with all those people and businesses who depend on our lifeline services.

"The Executive is committed to maintaining these vital lifeline ferry services to Scotland's islands and rural communities and I want to make it absolutely clear that fares and levels of services will be protected.

"This is a huge challenge and I seek the co-operation and assistance of the local communities, Caledonian MacBrayne and its workforce, local authorities, unions and others, to work with the Executive to deliver a framework of tendering which fosters the economic and social wellbeing of Highlands and Islands communities and builds on the success of Caledonian MacBrayne's present services."

EC Requirements

The European Commission has a duty under Article 88(1) of the EC Treaty to keep under review aids existing in Member States. In general state aids are deemed to be incompatible with the common market if they distort or threaten to distort competition by favouring certain undertakings and insofar as they affect trade between Member States.

The issues surrounding compliance are complex, but the options are there to allow us to continue to subsidise most of the routes through Public Service Obligations (PSOs). In order to provide these services through PSOs and comply with EC law, we need to put these services out to competitive tender.

Consultation

Views will be sought on:

• How the routes should be grouped in the tendering exercise. Tendering the CalMac network as a whole could be regarded as a barrier to competition. It seems likely that a minimum of two or three groups of routes would be necessary to meet requirements for adequate competition.
• Local authority services and how the rules may affect them
• Particular issues in relation to mainland-to-mainland routes. This includes Tarbert-Portavadie, Gourock-Dunoon and the local authority services of Gourock-Kilcreggan and the Corran Ferry. It is thought that the state aid guidelines rule out assistance to mainland-to-mainland routes. The Executive intends to make a robust case to the Commission for Scotland's remote mainland-to-mainland ferry services to be brought within the tendering exercise .

• Gourock-Dunoon - there is the additional issue of a private sector operator close by which rules out effectively a PSO on the present basis. The Executive believes the CalMac service provides an important component of an integrated transport system for users who do not have access to a car. We therefore intend to make representations to the Commission for at least a passenger-only service.
• Proposals to establish a separate vessel-owning company. There may be advantages in keeping the Caledonian MacBrayne fleet together to give economies of scale, secure future investment in ferries and provide flexibility in terms of fleet relief vessels. Any such company would be made accountable to the Scottish Executive.
• Future Scottish legislation and the role that a possible Highlands and Islands Transport authority might play.

In addition to the above, views will be sought specifically from CalMac on how best to structure itself to meet the challenge of competitive tendering.

BACKGROUND

1. A Public Service Obligation is, any obligation imposed upon a carrier to ensure the provision of a service satisfying fixed standards of continuity, regularity, capacity and pricing, which standards the carrier would not assume if it were solely considering economic interest.
2. Copies of the Deloitte & Touche report into Options for Gourock - Dunoon are available from the contact below. It should be noted that since this study was conducted some of the details within the report have now been overtaken by the wider issues.
3. Copies of the consultation paper Delivering Lifeline Ferry Services - Meeting European Union Requirements are available from the contact below.
4. CalMac currently operates a fleet of 28 ferry vessels providing passenger, vehicle and shipping services to the islands off the West Coast of Scotland and in the Clyde estuary. Nearly all their services are deemed to be of a lifeline nature and require Government support to keep them in operation. Under the terms of the formal Undertaking approved by the UK Parliament between the Scottish Ministers and CalMac, the Executive undertakes to advance monies to CalMac, by way of revenue and/or capital grants. This is done to support approved services that, in the opinion of the Scottish Ministers, are necessary to maintain or improve the economic or social conditions in the Highlands and Islands.