SCOTTISH EXECUTIVE

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Final Report: Options for the Ferry Services Between Gourock and Dunoon

1 INTRODUCTION

Background

Gourock and Dunoon are currently served by two ferry operators - Caledonian MacBrayne (CalMac) and Western Ferries. The two services operate between different coastal points -CalMac's service runs between the two town centres of Gourock and Dunoon, while the Western Ferries service runs between McInroy's Point, just inside Gourock, to Hunter's Quay, which is just inside Dunoon. Nevertheless, the services can be considered to be in direct competition with each other.

Currently, CalMac, receives a state revenue subsidy on the basis that it provides a socially necessary passenger service. This subsidy is not route specific, but allocated as a general contribution towards CalMac's operating costs throughout the network it serves. Grants for capital investment are made available by the Scottish Office on approval of an investment appraisal prepared by CalMac.

However, in order to ensure that the public subsidy is not used to undermine a private operator on the Gourock/Dunoon route, CalMac's service frequency is restricted, by the Secretary of State for Scotland, to a maximum of one return trip per hour. The annual number of trips run by CalMac is actually approximately one fifth greater than this, due to additional services at peak times, but these additional services are advertised and the Scottish Office is aware of them.

This arrangement was introduced just prior to 1982. At that time, the Secretary of State announced his intention to withdraw the public subsidy from the CalMac service and transfer it to Western Ferries' service, but this decision was subject to a route closure enquiry by the Scottish Transport Users' Consultative Committee (STUCC)1. There was considerable public opposition to the proposal to withdraw CalMac's service, particularly for foot passengers, because of concerns about its impact on service frequency, cost and quality. Accordingly, the STUCC recommended against the proposal. As a result, the Government decided to allow both operators to continue on the route, with CalMac restricted to one advertised return journey per hour, but authorised to use vessels capable of carrying vehicles. The Secretary of State at the time also decided to reduce the subsidy for the route from approximately £0.5 million per annum. to £0.25 million per annum, calculated on the amount required in respect of foot passengers.

Nevertheless, in the longer term, the sustainability and suitability of this arrangement is in doubt and the Scottish Office now believes that it is unsatisfactory to provide a subsidy to a public sector ferry operator which is competing with the private sector.

1.2 Study Objectives and Terms of Reference

The Scottish Office, in conjunction with CalMac and Western Ferries (Clyde), therefore commissioned this study to provide advice on the future pattern, structure and regulation of ferry services between Gourock and Dunoon. The purpose of the study was not to provide a single recommendation, but rather to identify and consider a range of feasible options with a view to reporting objectively on the relative advantages or disadvantages of each, particularly with regard to their financial and operational viability.

The terms of reference for the study required that it would be undertaken in two main stages:

• Stage 1, comprising a fact-finding exercise to provide a comprehensive analysis of the current situation, including a description of the services offered by CalMac and Western Ferries, and their current and future capacity requirements; and
• Stage 2, in which the consultants were required to develop options for future service delivery and to assess them against a number of criteria.

The detailed terms of reference are included as Appendix 1 to this report.

1.3 Report Structure

This report of the study is structured as follows

• in the next section we describe the approach and methodology we adopted to address the issues covered by the two stages of the study;
• in Section 3 we describe the service providers and method of route regulation;
• Section 4 describes the current arrangements for route operation;
• Section 5 discusses the market considerations likely to apply to any future solution;
• Section 6 examines the future investment requirements for vessels and pier infrastructure serving the Gourock/Dunoon crossing;
• Section 7 analyses the current costs of service delivery;
• in Section 8, we assess six possible options for future service delivery on the route, estimate the costs associated with each, and analyse their implications in terms of likely costs to the public purse;
• in Section 9, we summarise the strengths and weaknesses of each option; in section 10, we discuss the issues connected with the implementation of each option, and outline the next steps in the consideration of the future delivery of ferry services in the Inverclyde-Cowal area.

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