8.11 Public Expenditure Implications
The public expenditure implications of each of the options are shown in the table and chart which follow. These have been prepared on the assumption that the Gourock/Dunoon route is operated by a public sector company (CalMac), so that any deficit incurred on the route is funded by public expenditure and any surplus can be used to fund other public expenditure (i.e. it represents a net reduction in public expenditure).
The Table at Figure 8.2a shows the total Net Present Value accruing to the Gourock/ Dunoon service under each option, and how it changes compared to the status quo. The total route NPV is shown graphically in Figure 8.2b..
Figure 8.2a Total NPV of the Gourock/Dunoon service under different options
|
Total NPV |
Change compared to Status Quo |
|
|
Option A |
(£75834) |
£0 |
|
Option A/ 1 |
(£17,152) |
(£9,318) |
|
Option B/1 |
(£1,810) |
£6,024 |
|
Option C |
(£8,760) |
(£925) |
|
Option D |
(£4,586) |
£3,248 |
|
Option E |
(£627) |
£7,181 |
|
Option E with premia |
(£12,827) |
(£4,993) |
|
Option F |
(£4,572) |
£3,263 |
|
Discount rate: |
6% |
Source: Deloitte & Touche financial model of different future options for the Upper Clyde crossing
Figure 8.2b Total NPV of the Gourock/Dunoon service under different options
fig 8.2b
Source: Deloitte & Touche financial model of different future options for the Upper Clyde crossing
Option E is clearly the cheapest, but this excludes the premia payable. Option B is clearly the next cheapest option of those considered, but there are reservations surrounding it. Option F and Option D (route closure) give similar results, but Option F operates on the assumption that the operator of the competing McInroy's Point/Hunter's Quay services imply withdraws from the market. In practice, this is most unlikely, and a more realistic scenario for Option F would be a fierce - and extremely costly - competitive battle which would leave one operator insolvent and the survivor as the only service operator. There is no guarantee that the eventual winner would be the Gourock/Dunoon operator.
8.12 The Impact on the McInroy's Point/Hunter's Quay Service Operator
Figure 8.3 shows the financial impact on the McInroy's Point/Hunter's Quay service operator of the different options simulated through the route model. It has not been possible to assign a value for Option F for the reason set out above - that in practice Option F would entail a fierce competitive battle, with a single winner. If that winner was the Gourock/Dunoon operator, the operator of the McInroy's Point/Hunter's Quay service would leave the route. If on the other hand the Gourock/Dunoon operator was driven off the route, then the value of the route to the McInroy's Point/Hunter's Quay service operator would be close to the value estimated for Option D.
Option D is the option which generates the highest value for the operator of the McInroy's Point/Hunter's Quay service.
Figure 8.3 Total NPV & change in NPV of the McInroy's Point/Hunter's Quay service under different options (@ 6% discount rate)
fig 8.3
Source: Deloitte & Touche financial model of different future options for the Upper Clyde crossing