Rural Economy and Connectivity Committee

Meeting date: Wednesday, March 29, 2017

Official Report 691KB pdf

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Transport (Update)

Item 4 is evidence from the Minister for Transport and the Islands. I welcome Humza Yousaf to the meeting. Alongside him are officials from Transport Scotland. Bill Reeve is the director of rail; John Nicholls is the director of aviation, maritime freight and canals; Alasdair Graham is the head of planning and design; and Tom Davy is the head of bus and local transport policy.

We are quite pushed for time and there are quite a lot of questions. Minister, I hope that you will not mind if we excuse you from making opening remarks and move directly to questions. I also ask for your forbearance in allowing us to write to you after the meeting if we have been unable to get through all the questions that members want to ask.

I am happy to forgo making opening remarks and to go straight to questions. Of course, we will answer in writing any questions that we do not get through at the meeting.

Thank you very much, minister.

Minister, will you give us an update on the ferry services procurement policy review? Will you say whether, after the review, the Government is minded to award contracts directly to public sector ferry operators?

I thank Rhoda Grant and David Stewart for their engagement on the issue and for the helpful guidance and information that they have been providing.

We still aim to conclude the policy review by September, hence the request for a nine-month extension to the contract for the Gourock to Dunoon service. The terms of reference for the review are available. I have been involved directly, as have a number of MSPs, some of whom are here. The unions—primarily the National Union of Rail, Maritime and Transport Workers—have also been involved, as have the operators. You will remember that, on the back of the European Commission’s response, the review is looking at the structures of Caledonian Maritime Assets Ltd and CalMac Ferries. On top of that, we will look into the state aid rules—it is essential that I put that on the table.

In answer to the second part of your question, if the rules can be satisfied, the Government will be minded to make a direct award—with the very important caveat that it must be what the communities want, as I said in my statement to the Parliament on the matter. We would have to be aware of the communities’ wishes. Some communities might, for some reason, want us to go through a competitive tendering process—I am not saying that there are such communities, but we should take account of that. We would not necessarily base our judgment entirely on that, but we should certainly take account of what ferry user groups, MSPs and councils want.

If communities were minded to take on services themselves and run them as community co-ops and the like, would such an approach be considered as well as direct tendering to the public sector?

I am open to exploring such an approach. The internal ferry services in Shetland and Orkney are run by the councils, as you know. If councils want to take on services, or if co-operatives offer an alternative model, I will not have a closed mind on that.

However, that is not what the policy review is looking at. The policy review is a response to what the Commission said about the Teckal exemption being able to apply to the maritime cabotage regulation if certain conditions are met. We are trying to figure out whether those conditions can be met along with state aid rules. The answer to that question is not simple, and establishing it will be complex and will take time. Anything that arises above and beyond that can be considered after the policy review has been concluded.

11:30  

John, do you want to come in on that subject?

Minister, the issue of the internal ferries in the northern isles, which you mentioned, is one on which I await a response. You will be aware of the concern that exists. In the absence of a written reply to my letter, is there anything that you can say?

I thank the member for his patience. I know that he has written to me and is awaiting a response. That is partly because I am in continuing discussions with Steven Heddle, the leader of Orkney Islands Council, and Gary Robinson, the leader of Shetland Islands Council. The dialogue with Transport Scotland has been constructive.

As the member will understand, our manifesto and our First Minister committed to reducing ferry fares between the islands and the mainland. That is an immediate priority for us, and we plan to push ahead with it as soon as possible. The members who represent the constituencies in question—Liam McArthur and Tavish Scott—have rightly been holding us to account on that manifesto promise.

The discussions about the internal ferry services are important to those who live on the islands, and I want to explore whether any additional funding is available. Mr Finnie knows that there is no money down the back of the proverbial couch, as we are in a time of financial constraint, but I am trying to find a way of assisting the northern isles councils. At the moment, there is no such funding, but I am in continuing dialogue on the issue.

This is a direct question: how will you secure the future of private sector ferry service providers if the Clyde and Hebrides and northern isles services are awarded directly to a public sector operator?

My officials will correct my understanding if it is wrong, and they might wish to supplement what I have to say.

Let us take the example of Pentland Ferries, which operates across the Pentland Firth. Our directly awarding services that we currently franchise would not prevent a private contractor from taking on another route on a commercial basis if that is what it wished to do. Am I right about that?

That is correct.

Perhaps the member has a secondary concern. It would be correct to say that, if we were to directly award services to an in-house provider, that would have an impact on private companies that, in the future, wanted to bid for the Clyde and Hebrides routes, a northern island service or the Gourock to Dunoon route. If we went down that path, they would not be able to do that.

I reiterate that we should not prejudge the outcome of the review, as it is far from settled. There are a number of obstacles and hurdles, and there are conversations still to be had.

The current contract for the northern isles ferry service expires in April 2018. Given that the review is due to report this autumn, what contingency plans does the Scottish Government have in place to ensure continued provision of the service after April?

One of the first things that we did was start a conversation with Serco, which runs the NorthLink service. Stuart Garrett, who is the man in charge of NorthLink Ferries, has been very constructive and helpful in his engagement. That engagement continues, with a view to the northern isles contract, as it currently stands—for the reasons that the member rightly highlights—being extended. I will be happy to update the committee on those constructive conversations once we get to a final position.

It is not the case that if Serco were not to agree to an extension—I am not for one minute suggesting that Serco is planning to do this—the vessels would follow. As the member knows, the vessels in question are leased, so it would not be the case that there would not be a service; the service would continue. We are already thinking about what a plan B or a contingency plan would look like, but I reiterate that the conversations with Serco, which currently provides the service, have been extremely positive. Serco is very engaged in the process, and is acting constructively and in a very helpful manner.

Since the last statement was made on the moratorium on the Gourock to Dunoon procurement process, I have had a huge amount of representation from a number of stakeholders in the region who will be affected by that, including the user groups on both sides of the river and many of the parties who were involved in the process. As you can imagine, they are in a difficult position because they are looking to make substantial long-term investments in some of the vessels that might be available if they were to participate in those projects, and the delay—which is what it is—is causing a huge amount of uncertainty and concern among those stakeholders.

When might you look to take advice on the Teckal state aid issue? It seems that, no matter what, you have an underlying preference for direct, publicly owned contracts to be given where possible and where you are allowed to do so. That might be seen as overlooking some of the benefits of tender processes or some of the benefits that other operators might be able to bring to those services and the communities on both sides.

I will try to address a couple of those points. I have not received the same level of representation as the member has, and I do not think that I have received any representations from the member on the issue. However, if he wants to forward the representations to me, I will be happy to respond to those stakeholders individually.

The wider point is a reasonable one to make; it was also made to me by Jamie Greene’s colleague, Liam Kerr, during a round-table discussion. We cannot overlook the fact that a competitive process can have some benefits. It can drive efficiencies, for example, so there is an argument to be made. If we go down the route of a direct award, we must be certain that we put in place measures, targets and everything else that will help us to drive similar efficiencies so that the passengers or commuters benefit from an affordable and efficient ferry service.

I go back to what I said to Mr Chapman, which is that that does not mean that there is no space for private operators to operate. We put out to tender the Gourock to Dunoon ferry service that goes from town centre to town centre. As the member knows, Western Ferries operates a different route, and there is nothing to prevent Western Ferries from continuing with that, whatever decision we make. Will that decision have an impact on the business? Undoubtedly, because there is a competitive element there.

I take the member’s point and if he wants me to add more detail for the people from whom he has had representations, I am happy to do that.

I will move on to a more positive note, which is on the Arran ferry. It will be no surprise to the minister that that is of interest to me.

The Scottish transport appraisal guidance report has been published and it seems to point overwhelmingly to the retention of Ardrossan as the home port of that service. Will the minister outline the timetable for the next steps and the processes on how he might come to a decision to put the matter to bed?

As a point of clarification, the process has not gone through an official STAG process, but through an appraisal.

The member is absolutely right. The independent consultants engaged with the stakeholders and looked at a variety of important factors that the member will know about—connectivity, affordability and the socioeconomic impact or the cost to the economy and the taxpayer. The consultants looked at all those factors and consulted those on Arran and in south and north Ayrshire. I also had some personal engagement through going to Arran, meeting representatives of the Arran economic group and stakeholders in South Ayrshire Council and Associated British Ports, North Ayrshire Council and Peel Ports, and getting a presentation.

As the member rightly said, the report certainly weighed in favour of retaining Ardrossan as the port of choice. The legal advice that we were given was that the appropriate next step was to publish that in an open and transparent manner, as we said we would, then to allow the stakeholders two weeks to come back to us with any final submissions.

I will then take some time to analyse those final submissions. However, understanding the point about uncertainty that was made earlier in relation to the Gourock to Dunoon ferry service, I will look to make a final decision fairly promptly once those final submissions come in.

Stakeholders will have two weeks from the publication of the report in which to make submissions. There will then be a period of review by the minister and a decision. The unknown factor is that review period. Are we talking about weeks, months or days?

It certainly will not be months. It will be a limited period of time. I do not want to give an exact period because, if the submissions that come in are 1,000 pages long, it will take longer to address them than it will if they are a few pages long. It certainly will not be months and months—I do not think that it will even be weeks and weeks. I hope that that is a helpful steer.

Let us move on to railways.

We take a close interest in the timekeeping of trains, and we have seen a significant improvement in the public performance measure and moving annual average figures that ScotRail is delivering. Indeed, five minutes ago I looked at the current figure, which is 94 per cent. That is the kind of number that we are talking about. What are the inhibitors to that figure’s continuing to rise to meet the contractual level that is required, and what steps is ScotRail taking to keep the improvement that we have seen in recent months on track to deliver the contractual value?

I thank the member for that question, and I will try to be succinct in my answer.

You are right to acknowledge that there has been a continual improvement since the improvement plan was instructed. That was never going to be easy, because, as you know, the moving annual average depends on what the PPM is compared with the previous year’s PPM. This time last year, the PPM was fairly high, so even to match that, let alone surpass it, was always going to be a difficult task. I thank the thousands of people who are involved in the railway for their dedication in helping us to get to that point.

We are still not where I want us to be. I want ScotRail to increase its PPM and its moving annual average figures to meet its contractual targets as we go into the next year of the railway contract, and—to answer your question directly—there are a few inhibiting factors. You have just had a session with my colleague Keith Brown, who said that the weather is the master in the equation, and that can be true also on the railways.

Our discussions with Network Rail are on-going. You will know that 54 per cent of delays were attributed to Network Rail, and I do not feel that we yet have enough control over Network Rail or that it is accountable enough. That is not a constitutional point. When we discuss the devolution of further powers, we can get mired in whichever side of the debate people are on, but I hope to have a constructive conversation with all parties on the issue. It is getting to the point at which it is, frankly, frustrating the living heck out of me. I want to do a lot more but I do not feel that we have adequate levers over Network Rail, which is an inhibiting factor.

That said, I am positive about the improvement plan. Despite the fact that ScotRail is, technically, above the threshold for needing an improvement plan, I want to keep the improvement plan in place because it is pushing performance in the right direction and focusing minds. Alex Hynes from Northern will join us in June, and I hope that he will continue in that vein.

Are you satisfied that there will be a smooth handover from Phil Verster to Alex Hynes, who will take charge of the ScotRail Alliance? Who appointed him? Who pays his salary? Who is his line manager? Who employs him?

I will do my best to answer those questions, although I might refer some of them to Bill Reeve.

It should be said that Phil Verster has moved on—that was publicised—and Dominic Booth, who is the managing director of Abellio in the UK, has taken over the position. He holds a very senior position in Abellio—it has put its top person in the UK in ScotRail for the interim period until Alex Hynes can join. Alex Hynes was already part of Northern Rail—Arriva Northern—and contractual discussions took place, but he could not be secured before June, which is why Dominic Booth is in the position. Dominic has always been very accessible and engaging, and I have great confidence in his ability to continue the improvement in performance.

11:45  

To answer some of the other questions, I think that I am right in saying that Alex Hynes is an employee of Network Rail, as was Phil Verster. Network Rail will pay his salary because of its level, and that will have to be signed off by the secretary of state at the Department for Transport. I refer to Bill Reeve to check what I have said.

That is correct.

I am a fan of the idea of the ScotRail Alliance and having it all joined up. However, can we be sure that there will never be a conflict of interest for somebody who is running ScotRail, but is employed by Network Rail?

I can understand where you are coming from. The logic of the alliance is one that many people would find it difficult to disagree with. The secretary of state at the Department for Transport wants to roll out more alliances between the track and train operators, and that seems perfectly logical to me, but only if the individual in charge of the alliance has the full powers for both the track and the train under his or her discretion.

Instead of there being a conflict of interest, what I think is frustrating is that the alliance can at times seem optically flawed, as it was described to me by one individual. I get frustrated when delays happen as a result of signal or track faults, such as points failures, and then the individual who is in charge of the alliance says that they do not have full control over the necessary levers when it comes to Network Rail.

The ScotRail Alliance is a work in progress. I think that the idea is absolutely right, but we need to have a very honest conversation about the powers and levers that that individual has when they are appointed to head up that alliance.

Okay. Thank you.

My question is about the free week of travel and the service quality incentive regime or SQUIRE fund. Minister, when you last came before the committee you said:

“Contractually speaking, it is up to the Scottish ministers how the money should be spent but, generally speaking, and as we have always done, we decide that in consultation and in discussion with ScotRail.”—[Official Report, Rural Economy and Connectivity Committee, 1 February 2017; c 20.]

I pointed out to you that, prior to that, Phil Verster had said

“The contractual position is that the decision about where to invest it sits with Abellio ScotRail”,—[Official Report, Rural Economy and Connectivity Committee, 18 January 2017; c 27.]

to which you responded:

“I do not imagine that Phil Verster has a photographic memory of the contract in his head. I am more than happy to provide the member with the wording of the contract.”—[Official Report, Rural Economy and Connectivity Committee, 1 February 2017; c 20-21.]

You did that—you sent the franchise agreement to us. In it, paragraph 10.9 clearly states that

“The Franchisee”—

that is, Abellio ScotRail—

“shall propose for agreement by the Authority no less than once every Franchise Year how the Investment Fund should be spent.”

My first question is whether you agree that Phil Verster was correct in saying that the decision was for Abellio ScotRail, as the franchisee, and also that he had not agreed that the SQUIRE fund should be used for the free travel.

I feel that we are flogging a dead horse. We are having this conversation over and over again. We are almost heading down a rabbit hole and it is getting a bit pedantic, but I will, of course, try to provide some clarification.

I think that it would be helpful to have an answer.

I gave that to the committee in my letter of 13 March. I cannot speak for what Phil Verster said, but the franchisee and the authority—which is the Scottish ministers, or Transport Scotland on my behalf—enter into discussions on a number of occasions about where and how SQUIRE money should best be spent.

Mike Rumbles will remember that the issue came about partly because of a question from Kezia Dugdale at First Minister’s question time, in which she requested the First Minister to look into the proposal of a fare freeze. That was found not to be a viable option because of the accumulated costs. Therefore, in collaborative discussions, Transport Scotland and ScotRail came to a proposition about how to use the SQUIRE fund for the free week proposal that has now been well detailed. That falls entirely within the scope of the contract and entirely within the scope of how the SQUIRE fund can be used.

You have given evidence to the committee to the effect that you decide on the spending of that money.

No—

You did, and I just read out what you said from the Official Report.

Yes, but there is not a contradiction—

Let me ask the question, please.

Phil Verster took the opposite view. More strongly than that, he said that he had not agreed to the spending of that money. You have just said that there were collaborative discussions between Transport Scotland and ScotRail, but that does not chime with the evidence that Phil Verster presented to this committee. My question is, where exactly did the proposal originate? Was it with the minister or Abellio ScotRail?

It was done through collaboration. With regard to what Phil Verster said, you could call Phil Verster back to the committee, if that is what you want to do. However, I see no contradiction between what Phil Verster said and what we have said. What you have read out from the contract states that it is for the franchisee, through a collaborative process, to make a proposal, but that the ultimate decision about how that SQUIRE money is spent rests with Scottish ministers. That is what you have read out.

It does not say that in the contract—

It does, and we have provided clarification in relation to that.

Could you point out which paragraph says that?

I would be happy to write again to the member.

I have the contract here.

Again, the spending of the fund lies at the discretion of the authority. As long as it is being used for qualitative aspects of the franchise services, we are well within the contract to do that.

We work in a collaborative way. The member is suggesting that either the franchisee makes an instruction or the decision is solely for the authority, but that is not the case. Decisions are made through a collaborative process. SQUIRE funding has always been dealt with in that vein. I am confident not only that we met the requirements of the contract, but that we acted within the remit around SQUIRE funding.

Convener, as the evidence that we have got is contradictory, I would like Phil Verster to be recalled to the committee. The contract is very clear that the initiative for the spending of the money must come from Abellio ScotRail. The minister is saying that there was a collaborative decision, but Phil Verster has told us that he did not agree to the decision. We do not really know who controls the fund, and I think that it is important with regard to how the fund is spent in the future that we know who is in charge of it. I request that the committee recall Phil Verster so that he can confirm his evidence.

Perhaps the minister can help me to understand this. I am looking at the sections that were quoted. My understanding is that, at least once a year, the franchisee will propose a suggestion on how to use the SQUIRE fund, that it is up to the authority not to unreasonably withhold its consent to the proposal, and that, if the authority withholds its consent, it can come up with an idea of its own. Can you help me to understand the process? When the proposal came from you to use the fund in the way that you suggested, had the franchisee come up with any ideas about what to use the fund for, and, if so, why were those ideas not considered to be as good as your one?

I am sorry, but I do not think that I follow you entirely.

As I mentioned, the background to this was a proposal that was made at First Minister’s questions. We asked our Transport Scotland officials to work with ScotRail to see whether there was merit in the proposal and whether it could be delivered. They came back to say that there would be a cumulative cost of X million pounds, which was too high and would have taken investment away from the railway. We asked them to work collaboratively with ScotRail to see what other proposals could come forward. Those proposals then came to me, as minister, and I have the discretion to say whether any proposal is a sensible use of SQUIRE funding. The proposal was then discussed with the Cabinet Secretary for Finance and the Constitution, who then made a statement to Parliament on the back of the decision that was made.

I do not know that I can provide you with any more clarity than that, other than to say that the process was handled in a very collaborative manner in terms of our spend on SQUIRE.

I am obviously misunderstanding the sections of the contract because my concern is that, although there is a clear procedure for how to use the SQUIRE fund, it does not appear to have been followed. It would help me understand that the procedure had been followed if the franchisee had come up with an idea but the authority rejected it and put forward its own idea for discussion on the basis that it was better than the franchisee’s. However, no idea came from the franchisee; it came only from the authority, which is contrary to the sections to which Mike Rumbles referred.

As I keep saying, it is done collaboratively. When we decided that we were not able to proceed with the proposal for a fare freeze because of the cumulative cost, the instruction was to work collaboratively with Abellio to find what else could be done to benefit passengers because of their patience during a fairly disruptive year. The proposal for a free week was made and I was content with it, as were our colleagues in Abellio.

Is it possible to get the costings that ScotRail fed back to ministers before you devised the free week scheme? What percentage of travellers have received their free week and what percentage are outstanding? How many will eventually get a free week’s travel whether or not they are season-ticket holders and when can they expect it to happen?

We can get the detail on what we think the cumulative cost of a fare freeze would have been, if that is what the member is looking for. Our free week policy is backed by £3 million. Nobody has claimed it because, as the press release stated this month, the claiming period will be in May and potentially into June. That will be for people who hold an annual or monthly season ticket. Thereafter, further discounts for people who travel perhaps on a more leisurely basis will be explored.

You talk about people who travel on a more leisurely basis. However, some people just cannot afford to buy a season ticket although they use the trains. Will they get a free week’s travel?

I do not think that it will be a free week’s travel, but further discounts will be considered. We have backed the scheme up with £3 million-worth of investment, which is £1 million more than the Opposition asked for. Annual and monthly season-ticket holders will be able to claim the free week’s travel later this year and further discounts will be introduced not only for people who travel daily but for leisure travellers—those who do not travel daily or regularly.

Weekly season-ticket holders who register for a smart card will also get a free return journey across ScotRail as part of the offer. The offer is designed first to address regular travellers, including weekly season-ticket holders as well as monthly and annual season-ticket holders. We have estimates for the likely uptake of it and, to the extent that the money is not used on that, it will be used for other passengers as well.

It seems to me unfair that people who cannot afford to pay for a monthly ticket are not going to get a free week’s travel. Some people can afford to buy a weekly ticket, but they will only get one day. It seems that, the better off somebody is, the better the deal they will get, whereas if somebody is struggling to make ends meet, they will not get much back.

That is the reason why there will be further proposals that will address other travellers who do not have season tickets.

When can we expect to see those proposals?

In part, that will depend on the uptake by people claiming the free week later this year. You can expect to see more detail on that later in the year, but it will be well into the summer or autumn.

Can you give a brief update on the Edinburgh to Glasgow improvement programme? I note that the evening blockades to Linlithgow end this week; speaking personally, I very much welcome that. Are we still on track with the rest of the project? Perhaps you could also take an opportunity to put on the record where we currently stand with the redevelopment of Glasgow Queen Street station, if there is something useful to say.

12:00  

To take the second part of the question first, I can inform the committee that in the next 48 hours I should be able to approve and move the order under the Transport and Works (Scotland) Act 2007, which should help to move things along with Glasgow Queen Street station.

When I was last at the committee, I mentioned that some of the aesthetic work around the station is at risk of slippage. That remains the case. However, I also mentioned that we are committed to and focused on retaining the delivery milestones for electric services. EGIP remains on schedule to deliver the first electric Edinburgh to Glasgow train service in July. The introduction of the first—new, longer, faster and greener—class 385 train remains on schedule for autumn, with the full fleet becoming operational on the Edinburgh to Glasgow route during December. We are focused on those milestone achievements. Improved journey times and trains that are faster, longer and greener are part of the service that we want to provide. The aesthetic work at Queen Street station, though, is at risk of slippage; that has not changed.

The committee was sent a paper from Network Rail on the TAWS order. When do you think that that will be issued?

In the next 48 hours.

So the knock-on effect will be a delay of—

It is not possible at this stage to say exactly how long the delay will last. Although we have tried to have a collaborative process with respect to the TAWS order, thereby engaging with those who object—we know the objecters fairly well—once the TAWS order is made, there is still nothing to prevent them from holding up the TAWS process, and indeed the further process, with legal wrangling. We hope that that will not be the case, because we have engaged substantially before making the order. However, at this stage it is not possible to say.

I will endeavour to keep the committee absolutely updated on when I think that the redevelopment of Queen Street station will take place. I can just reiterate that, at the moment, the slippage is focused on the aesthetics. If that began to affect operational capacity, we would again endeavour to keep the committee updated.

We are running short of time, and there are several questions left. I am minded to take one more, after special pleading from Richard Lyle. If he would like to ask that one, I am happy, and we will submit the rest in writing.

Thank you, convener—maybe I get too uptight.

The 1985 act deregulated buses. Some people thought that it was a great idea; some, like me, think that it was wrong. Media reports are indicating that a transport bill is forthcoming. Will that bill be innovative and all-encompassing, will it include local authorities and make it possible for them to run buses that sit in their depots to outlying areas, in order that people can travel on a bus? That is being brief.

The transport bill, as we envisage it, will have three elements. All this is, of course, subject to consultation. The bus element will look at a number of factors, one of which will be local franchising. The member will probably be aware of the UK Bus Services Bill, which is going through the UK Parliament and is at the moment with the House of Lords. That bill also looks at local franchising, which local authorities have been asking us about and calling for. We are open minded about exploring franchising. Of course, the checks and balances in the franchise are very important, and we will engage with the local authorities as I have been engaging with the bus operators both through the CPT and bilaterally. It is important to give them reassurances.

From my discussions with local authorities, there seems to be some legal dubiety around whether local authorities could start up their own municipal bus companies. We hope, through the bill, to remove that legal uncertainty. We will also look at partnership working, smart ticketing and open data in the bus element of the transport bill. The bill will go through the normal legislative process, which will include full consultation.

Thank you, minister. Due to the shortness of time, several questions have had to be missed out. The deputy convener and John Finnie had questions, both of which I propose to submit to you in writing. We have had a brief drive through some of the issues. Do you want to make a very brief closing statement, or are you happy to leave it at that and answer any further questions in writing?

I am happy to write to the committee if any further clarification is needed.

Thank you, minister.

I suspend the meeting briefly to reconfigure the panel.

12:06 Meeting suspended.  

12:08 On resuming—