Public Petitions Committee

Meeting date: Tuesday, September 3, 2013

Official Report 587KB pdf

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Current Petitions

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Ferry Fares (PE1421)

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Interisland Air Services (PE1472)

Item 2 is consideration of three current petitions. As previously agreed, the first two petitions will be considered together.

First, the committee will take evidence from Western Isles Council on PE1421, by Gail Robertson, on behalf of the Outer Hebrides Commerce Group, on fair ferry fares; and on PE1472, by Councillor Gordon Murray and Councillor Rae MacKenzie, on behalf of Protecting Inter-island Transport Links, on interisland air services. Members have notes by the clerk on the petitions, which are papers 1 and 2.

I warmly welcome Councillor Angus Campbell, who is the leader of Western Isles Council, and Councillor Norman Macdonald, who is its convener. Thank you very much for coming, colleagues. I know that it is your committee cycle this week, as I bumped into Councillor Macdonald in Benbecula last week, and that you have had to disrupt your ordinary work in the Western Isles to come here.

I understand that Councillor Campbell will make a brief opening statement on the two petitions.

Thank you for the opportunity to come to speak to the committee.

The two issues in front of members are very important for the Outer Hebrides. I will start with a few words on the road equivalent tariff, if I may.

In my 14 years on the council, we have always had a lobbying group on RET, and we were delighted to see RET introduced to the Western Isles. It made a significant impact on our own people’s ability to travel, it brought in tourism, and it was important to the cost of bringing goods into the islands. Unfortunately, our economy relies very much on imported goods, and everything that comes into the islands adds to the cost of living. We were therefore disappointed, to say the least, when we saw that commercial RET was being removed.

Our issue—and, I imagine, the issue of the group that is mentioned in PE1421—is the evaluation that was done of the effect of RET on the commercial rates that were paid. I certainly feel—and I think that most councillors feel—that the evaluation of the process was not a very sophisticated look at the effect of the commercial help of RET. It has become apparent with the bit of work that has been done since then that it offset a lot of other rises and costs for hauliers. Indeed, if we look at what has happened since it was changed, we will see that there has been a significant increase in the cost of bringing goods to the islands, which has affected every person on them.

I will give one example. It is estimated that, for a new couple, building a house costs an extra £3,000 because of the increased cost of bringing goods to the islands.

Our council recently had a joint meeting with the Outer Hebrides Commerce Group, which lodged PE1421. The council decided unanimously—that does not happen often in our council—to support a return to commercial RET as it was first introduced. That is our view on commercial RET.

I will put the flights issue in context. Like everybody else, we have been in a difficult place financially for the past three years. We have dealt with a 10 per cent budget cut. This year, we were on our third year of consultations after all the low-hanging fruit—the easier choices—had been picked in the previous two years.

As our history shows, we are committed to connection across the islands. Our investment in the interisland ferry movement has been significant in getting ferries to connect our islands.

One choice that was on the table was the removal of the Barra and Uist air services. In October and November, we did a round of public consultation on a list of all the possible ways of closing the funding gap. The priorities that came out of that were care of the elderly, education and community transport.

Norman Macdonald and I conducted meetings from the Butt to Barra. As a result of that process, which had the biggest consultation response that I have ever seen, the unacceptable options were taken out, the acceptable options were taken and there was a band in the middle, which included the Barra air service. The result was that much higher priority was put on community transport, education and home care. That came through even from community consultations on Barra. Unfortunately, we were in a difficult place, and we felt that people told us in the consultation that they would prefer to make such choices over some of the less palatable choices.

We know that the situation is not easy and we hope that, one day, we can revisit such things. However, like everybody else, we must live within our means.

Thank you for raising issues to do with RET and air services. We will start with questions on RET then move on to air services.

Has your local authority collected evidence on the impact of the changes to RET that affect commercial vehicles? You have touched on that.

We have supported the commerce group’s work and we fed into the further study to evaluate the effects on trade in general and how they affected the prices that people who live on the islands pay. Our economic development department has been heavily involved in that work. We have also offered the group a lot of support with providing evidence on that issue.

It is fair to say that Gail Robertson has done a great job with the group to highlight the RET issue. I think from looking at the local press and listening to local radio that she has had a high profile on the subject.

There have been changes in the transitional arrangements—for example, the limit for commercial vehicles went from 5m to 6m. Has that had much effect? Did you welcome that or did you see it as marginal?

We absolutely welcome anything that brings down the cost of transport. That change certainly helped, and a few operators that travel with certain types of goods have been able to change from 5m to 6m vehicles to accommodate more on trips. However, it is without doubt that the majority of goods come to the islands on 40-foot wagons—they make up the vast percentage of travel backwards and forwards. The reinstatement of that cost still lies with everybody.

The effect on the Western Isles economy is still an outstanding worry and concern.

Absolutely. The majority of goods come on 6m wagons but, for example, house frames cannot be carried on such wagons.

There is concern in the Highlands and Islands Enterprise area about the Western Isles economy and, in particular, the loss of young people to the economy. I presume that anything that hits economic activities in the Western Isles would concern councillor leaders such as you.

Absolutely. The top priority of the council and the community planning partnership is to find work so that people have the choice whether to stay and live in the islands. The recent census showed, for the first time in many years, a slight increase in the population but, if you look into what lies behind that, it is the elderly who account for most of the increase, while the working population continues to decline. However, I am encouraged about the small increase in the zero to five age group, and I hope that that is a sign that our work is starting to have an effect.

Thank you for that. I now bring in Angus MacDonald.

Madainn mhath—good morning. It is good to see you both again, especially in the capital.

Some of the people in Lewis and Harris I have spoken to have said that local hauliers did not pass on to their customers the benefits of RET. What do you say to them?

There has been a misunderstanding and a misconception about the basis of the decision to remove RET from commercial vehicles. Following the announcement of the introduction of RET, one haulier made it clear at the outset that it would not be possible for him to pass on a 40 per cent discount. That statement was taken out of context. The reality is that the haulier was unable to do that because he already receives a 25 per cent discount on fares through the haulage rebate scheme when he uses the freight ferries to take his vehicles across to the islands. However, his statement was taken to mean that he would not pass any of the RET benefit on to the customer.

Councillor Campbell mentioned the Halcrow study. The piece of work that was done in consultation with the Government, the council and others has shown that that report was flawed and not robust. Everyone now accepts that the benefit was passed on from the hauliers to their customers, but the question is whether their customers in turn passed on the benefits to individuals. For example, it can be demonstrated that the benefit was passed on to the big supermarkets, but whether they passed that on to their customers in any significant way is a matter of conjecture because it is hard to make on-the-shelf pricing comparisons.

There is no doubt that most people in the Hebrides accept that the hauliers—as they are able to—passed on the benefit to their customers. Some passed on the benefits in full; others did so to a lesser extent because they were already in receipt of discounts that related to volume and using the freight ferry.

It is still a contentious issue. As recently as two weeks ago, I spoke to a number of small and medium-sized enterprises and was told that hauliers did not pass on the benefits of RET. Indeed, some maintain that, when RET was introduced, one haulier in particular increased his rates. There is clearly disagreement in the islands on the issue.

Has Comhairle nan Eilean Siar considered offering financial or other support to groups affected by the removal of RET fares for commercial vehicles?

The interisland ferry service offers that support to hauliers in the islands through a business assistance scheme—the scheme must comply with state aid rules—but we do not offer that to hauliers who bring goods into the islands. That is generally seen as the way in which those subsidies work. It is the same with air services. For services into the islands, it is usually the Government that provides subsidies, but we take responsibility for services within the islands—in that respect, there is no difference between us and Orkney and Shetland—although we were delighted by the Government’s announcement that it would introduce RET on the interisland services within the lifetime of this Parliament. The sooner that happens, the better for the hauliers who ply their trade between our islands.

10:15

At a time when we are struggling to provide financially for our core services, much as we would like to see more done in economic development—and as a local council we are probably more active than most, because of the nature of the islands—we must make priority choices. The same sort of discussion can be had about the air services.

As a small businessman myself, I think that what is apparent is the rise in prices since the change back on RET. The second piece of work that has been done is credible and more sophisticated, identifying exactly what costs were coming in on top of that at the time, such as increased costs for fuel and insurance, and how those increases were dealt with. Some companies can show eight years of no increase in transportation costs to the islands by opening up their books. We would all agree that there are not many things in life that have been cost equal for the past eight years, but I accept that the perception out there is that people are paying too much and, as a small businessman, I can guarantee that I would always complain about that.

What has resulted from your discussions with the Scottish Government?

There are quite a few issues outstanding from the discussions with the Minister for Transport and Veterans. Following the meeting at which everyone agreed that we have a set position on the reintroduction of RET for commercial vehicles, as it was, we wrote to the minister asking for another meeting. I have had an acknowledgement, but I am still waiting for a time for that. The same applies to a couple of other issues, so I have written again saying that it would be good to deal with all those things together. I await a reply, and I hope that we can get positive engagement on that again.

The briefing paper refers to various reports and gives dates for when they were produced, and it also refers to a six-month study being carried out with stakeholders. Can you tell me exactly where we are on the reports that have been carried out and are being carried out?

I cannot give an exact date, but the Halcrow report was done during the period when commercial RET was being looked at and the decision was taken to pull back, based on evidence. The bigger piece of work, the six-month study, came to an end at the end of last year. I think that it was finished in January, and the Government went public with it in May.

I am still confused, because the paper states that

“In April 2013, Transport Scotland advised that it intended to carry out a review of large commercial vehicle fares”,

and that the

“report was published on 13 May 2013.”

It is probably me who has got the figures wrong, but I have to satisfy myself on that point.

I understand the view that you take of this element, but I would like to ask about the example that you gave in relation to house prices. Is that all down to RET or is it down to other economic factors?

That figure was used as an example of the effect of RET on the cost of bringing goods to the island. If a 40-foot trailer costs an extra £500 or £600 and someone needs to bring two or three across, you can readily work out the costs in your head. I do not know whether the committee has seen the report on the second study that was done, but it gives more comprehensive detail on how those costs were calculated than I can give you today.

Based on those reports, would you be satisfied with further amendments to the proposed fare structure for longer commercial vehicles, or do you see the reintroduction of RET as essential?

Our position as a comhairle is that, ideally, we would be looking to get back to where we were, but there is no doubt that anything that would move the position on would be welcome. We are more than willing to have any constructive discussions that might move us along that road.

I was going to move on to air services, but Jackson Carlaw and John Wilson have further questions on RET.

When I was on Arran over the summer, I spoke to a number of businesses. I think that other islands would also have welcomed the opportunity for commercial RET. The response that they have received from the Government and ministers is the one that you have been challenging this morning: that the experience in your community was that that money was pocketed and not passed on to the community, and that the issue is therefore off the agenda. Getting to the truth of the matter is fundamental to the wider public consideration of the issue.

What slightly worries me about your evidence this morning is that it is all somewhat anecdotal. We will not see a change of policy based on statements that begin, “Most people accept,” “We can say,” or, “There was one haulier who might have.” To what extent can the council, notwithstanding the various reports that have been published, produce something a little bit more authoritative and empirical about the experience of named companies and individuals who are prepared to attest to the fact that they feel that the benefit was being passed on to the community?

Finally, having looked through all the evidence—I know that the production of reports is under way—can you at this stage quantify the financial loss to the islands in the 12 months following the withdrawal of the commercial subsidy? That would give us some idea of what the economy has probably lost in total as a consequence.

The report that MVA Consultancy concluded in January is the most definitive and robust. The hauliers provided their books to the consultants on an open-book basis to demonstrate that they were passing on the benefits from RET.

There is no doubt about the benefits of RET. The £3,000 figure that Angus Campbell mentioned is the increase in cost from the period when RET applied to the period when RET was removed and fares increased by 50 per cent. The figure equates to the difference over that period, so that was the benefit for one household as they got a house across. That does not happen every week, but it happens quite often. The most important thing is the number of articulated vehicles that go on the ferry every day of the week and bring goods to the isles. One of the challenges that both sets of consultants faced in putting a figure on the loss is that it is very difficult to quantify the difference, but in that period it is probably into millions of pounds.

The Government is probably best placed to know the figure, because it knows what it has saved as a result of not paying the 40 per cent discount. That is the tip of the iceberg in terms of the loss, because that is the actual saving, but there is also a knock-on effect on services. It is very difficult to put an accurate figure on the loss.

I am sorry to cut across Mr Carlaw’s question, but I am not aware of the second consultants’ report that you mentioned. Can you provide the clerks with that information? It is crucial that committee members see the second consultants’ report.

Absolutely. I think that that was a report that was commissioned jointly by us and the Government. As Angus Campbell said, the Government ultimately published it in May.

Your second point about savings for the Government is obviously something that we can determine from the Scottish Government by asking it the question or getting a clerk to write to the minister. That information is easy to get once we know that that figure exists.

I simply want to commend something. Mr MacDonald was slightly concerned because he still met people who thought that the benefit had not been passed on. That is very much the nub of the argument. I think that the public impression is that the argument has been lost. If you think that that is not the case, a considerable job needs to be done to counteract that impression, and that needs to come from within your community in the first instance to help us.

Absolutely. On the response that Mr MacDonald has received, I do not think that the response would be different in any town in the country if people asked, “Are things more expensive now than they were?” There is no doubt about that. There is an element of that, but the reality is that things would be a lot more expensive—even now—if it were not for the RET level that is currently in place. That is the critical point for us. Things would be a lot worse than they are. There is no doubt that you will find people who will say that things are generally more expensive. There are services that RET has no impact on—it has no impact on electricity, for example—and people are paying more. Therefore, the general view that we take is that things are more expensive.

Good morning, gentlemen. I want to follow up on Jackson Carlaw’s issue. You referred to all hauliers opening up their books for examination. Did all hauliers participate in that exercise? Did they all provide their accounts to show the difference that RET made to their operations and its impact?

No. I think that one or two still refused to take part in the process. There is no way that I have come here to protect or stand up for hauliers; that is their business, and they have to do that. We are looking at the effect on our community. Most of the hauliers came forward, including some big ones, and said, “The people doing the study can go in there on a confidential basis.” That is why it would be very good for the committee to see the study and the conclusions that those people were led to.

I accept what you say. The reason why I asked the question is that RET would apply to every haulier and, if it applies to every haulier, I would expect all hauliers to participate in any exercise that could allow an argument to be built up to allow the further introduction or reintroduction of RET. Our difficulty is the issue that Angus MacDonald raised. Some hauliers said that they were passing on the benefits of RET to their customers, but there was no guarantee that those benefits were then passed on to the consumer. Jackson Carlaw referred to the public perception. It is very difficult in these economic times to get that public perception correct because of the increasing prices of foodstuffs and other stuff, no matter where a person is in the United Kingdom. It is about trying to ensure that the general public feel that there is a genuine benefit in providing RET to hauliers and that benefits are passed on not only to the hauliers’ customers but to the residents of the islands.

We would have no argument at all with that. That is the difficulty with a chain of businesses. However, if people do not campaign for RET for the islands, a 40 per cent uplift in building costs will remain, which makes it virtually impossible for people to live and work on the islands. I agree that it is important that we must find a way for benefits to filter down to the end user, but there is no doubt that, without such measures, you are giving up on people who live on those islands.

It could be a condition of receiving a rebate that hauliers open up their books to the Government on a confidential basis so that at least it is sure that the discount has been passed on by the hauliers to their customers. After that, it is largely due to competition. If somebody takes a pallet full of whisky across on a truck, for example—perhaps this is not a very good example—that is discounted by 40 per cent by the haulier for a customer and another customer who is in the same business, and one of the retailers passes on that discount, competition will drive it beyond the stage at which the haulier passes it on.

It is very difficult to intervene in such situations, but if one supermarket is selling its whisky 40 per cent cheaper than another supermarket because it is genuinely passing on the discount to the consumer, clearly people will support that business. Competition is really the only measure there is for that at the moment because I do not think that the big supermarkets are prepared to open up their books to us or to anybody else.

10:30

We have found that with the supply of fuel to the Western Isles. I have been involved in a few of these areas and your questions about RET also apply to the provision of fuel. John?

Thank you, convener—that is all of my questions.

I am conscious that we are slightly behind time, but I will bring in Chic Brodie and then I want to move to air services.

I am not sure how much foundation there is in this question but it follows on from what John Wilson said and it has relevance to the next part of our session. Output in the Highlands and Islands has gone up—in fact, population has gone up. Given the constraints that you have, can you explain why that is happening?

In the Highlands and Islands?

In the islands.

I do not judge myself qualified to speak on that. The population figure that I referred to earlier is certainly worth a further look in terms of what is happening on the islands—in the Western Isles, where I come from. We have not got over the change to the demographics: our working age population is still going down. We are seeing a bit more economic activity. Within that figure, you will see that 12 per cent of the working population now work off the islands. A big part of our economy involves a breadwinner having to work away from home and bring the money back into the islands.

Our challenge is to get core businesses—production businesses—on the islands. For us, one of the big drivers for that over the past 10 years has been renewable energy. That is a whole other argument, but we have been thwarted in it. The Outer Hebrides still has the issue of maintaining businesses of sufficient quality to support a good workforce—that is still our challenge today.

The cost of starting a business on the Western Isles is considerably more than on the mainland because of the transport costs. It is an argument that we are having on European funding. We have to recognise that, if someone wants to start a business, it is not the cost per job but the cost of providing the job there that they have to consider, if we want people to work and live in the islands.

We will move on to air services, and I will start with a couple of questions.

First, why were air services cut? You mentioned services from Stornoway to Benbecula and the service from Benbecula to Barra. Why were they cut by your local authority?

I think that it was purely down to our financial situation. We have had to deal with a £12 million cut to a £120 million budget over the past three years. We had the cut to air services on the table a year before, and fortunately we were able to make other cuts, but this time it has been really difficult working out where to go to find the money.

As I said in my introduction, the cut was part of the consultation process, which was a four or five-month intensive period of consultation. We have had nothing like it in the Outer Hebrides before, to my knowledge, in terms of response and engagement and size of meetings. The priorities that came through clearly to us from the people were very much towards other services.

The Barra air service, for instance, is used by about 2,000 people a year, mostly from the public sector—almost universally from the public sector—and tourists. It was costing us £83 per single trip subsidy for a tourist to go from Barra to land on the beach and £83 to get them back again. We said to our people, “Is that good value for the restricted money that we have left, or would you rather have us keep more home helps, provide more community transport or do more in our schools?” The answer was quite emphatic, and that is why we ended up taking the decision that we took.

On that point, I attended the first consultation meeting on our budget cuts in Castlebay. When we went out to the wider public, the consultation was on some 140 different lines of budget that directors of departments had brought forward as the cuts that they deemed, as directors, were most palatable, given that we told them that we did not want to impact on jobs or front-line services. We went out to consult on those options.

There were more than 60 people at the Castlebay meeting and more than 120 at some of the other meetings in the first round of budget consultation. We said to them, “These are the options that we have; what are your views?” As Angus Campbell said, the priorities that were identified across the islands involved community transport within communities—to take people to post offices, shops, surgeries and so on—and education, specifically specialist teachers in schools. That is one place in the education system where cuts could have been made, because we do not have to have specialist teachers. Those were the key issues that people raised as major concerns.

We said that the council would make decisions and come back in January with a range of measures that we were minded to take. We mitigated the worst impacts and, in January, because we had publicised what we were minded to do and taken into account people’s concerns about the services—the home-help services, the specialist teachers and community transport—the number of people who turned out at the consultation meetings was less than a third of the number who turned out at the first ones, and the feedback we got was very positive, as we had reacted to people’s priorities.

At the meetings in Barra and South Uist, people expressed concerns about transporting people from those areas to hospital. They encouraged us to engage with the health board to see whether it would contribute towards the maintenance of the air services. We did that, but we did not get a positive response. We investigated a range of avenues that would allow us to retain those services. The other option was to cut the Benbecula to Stornoway service altogether. The compromise was to reduce that service to a three-days-a-week service.

There were difficult choices across the board, but we feel that the balance that was struck was largely right. We have the evidence for that in the consultation responses, in terms of the number of people, including those in Barra and South Uist, who expressed concerns about the air services as opposed to the other services.

The other thing that changed within that period involved the inter-island ferry service between Eriskay and Castlebay. As the number of people using the air service has declined rapidly, the number of people using the ferry service has risen. There has been a significant shift. People have decided that they want the flexibility and the ease that is provided by a service that goes back and forth across the sound three or four times a day rather than one that still depends on the beach in Barra.

The Scottish Government says that it has funded your local authority for the air services. What is your argument against that point?

I have heard that argument, but one of the great things that the Scottish Government has done has been to remove ring fencing with regard to how we spend our money. As I understand it from discussions with the Government, the idea is to allow us to address local priorities, and the local priorities, which were clearly expressed to us by the people to whom we spoke, were what we tried to address through our decisions on the budget. I cannot see why a Government would want to ring fence funding for a service that is not one of the priorities of the people in the area.

In March, when we were in Stornoway, Councillor Gordon Murray and Councillor Rae MacKenzie gave evidence that, when the Outer Hebrides were first brought together under one local authority, every effort was made to provide the infrastructure to bring the communities physically together and that the air service between Barra, Benbecula and Stornoway was one of the first achievements in relation to that goal. Now that you have ditched that lifeline service, where does the principle of bringing together the island communities stand?

I do not think that we have ditched the Benbecula to Stornoway service; it has been reduced from a five-day to a three-day service. However, the Benbecula to Barra service has been discontinued.

You are quite right that linking up the islands was an aspiration of the local authority long before Angus Campbell and I had anything to do with it. Indeed, that is what the council has done over the past 35 to 40 years by building causeways and putting in place ferry services where previously there was none. That is what has had the impact; it has also had an impact on the Sound of Harris ferry, which runs between Leverburgh and North Uist.

Day and daily, a huge amount of traffic is going back and forth throughout the islands. However, the difference with the Benbecula to Barra service is that, as Angus Campbell has made clear, fewer than 2,000 people used it; the average load factor was 25 per cent; the council subsidy was four times what the customer was paying for the seat; and a third of the seats were taken up by tourists staying in Barra.

We welcome tourists but, given the range of cuts that we had to make, we would not be acting responsibly if we maintained a service that provided for visitors and tourists in Barra to go on a 20-minute flight to Ballavanich, not even get out of the plane and then 10 minutes later fly back to the beach on Barra and for which we were paying an £80 subsidy per seat at the same time as we were considering reducing overnight support and home-help services.

That was the basis of our decision—and we did not take it lightly. As Angus Campbell has said, we considered air service reductions in each of the past three years and left them alone. However, the low-hanging fruit has now disappeared and we are now having to make difficult choices. No one welcomes the removal of services, but every local authority in the country and indeed every Government has to look at what it is doing.

I take your point about subsidising tourists but surely the flights are not jam-packed with tourists. There will be people trying to get to the Western Isles Hospital, for example.

The reality is that these flights are not jam-packed with anyone. You are talking about an 18 or 19-seater plane used by an average four or five people, a third of whom are considered to be tourists and another third public sector workers.

There is undoubtedly an issue about transporting patients to hospital, but during the consultation process the people in Barra made it very clear that if they were going to end up in Inverness or Glasgow for medical treatment they would rather go straight from Barra to, say, Glasgow than go from Barra to Benbecula to Stornoway and then to Inverness or Glasgow.

When we asked Transport Scotland whether it would be prepared to consider a second rotation of the plane to Barra on a daily basis, it said no. The fact that that service is full much of the time is a constraint in getting patients to hospital. On the other hand, full flights are a good thing for air service operators and anyone who subsidises a service, and we suggested to Transport Scotland that a second rotation direct from Glasgow to Barra as the tide allowed—which is possible—would alleviate the problem significantly and allow everyone who needs to go to hospital in Glasgow to get there timeously.

We are well over time, but I am keen to get in as many questions as possible. I must therefore ask for short questions and, indeed, short answers.

I will be as brief as I can, convener.

I presume that both of you will have read Friday’s West Highland Free Press article entitled, “Loss of Barra air link must be reversed”. For the committee’s benefit, I will read out this very short article:

“When they were compiling their list of savings, officials at Comhairle nan Eilean Siar’s headquarters in Stornoway turned their attention to the inter-island flights between Barra and Benbecula.

Here was a service that seldom flew with every seat occupied”

as you have clearly stated.

“Those on board were mainly patients on their way to medical appointments, with a sprinkling of councillors and public-sector employees making up the rest.

So councillors voted to axe the service, saving £148,000 a year. The number of flights between Benbecula and Stornoway was also cut to three per week.

Barra is now suffering the consequences.

There are elderly patients who have to take a ferry and then a taxi to get to Benbecula for a flight to Glasgow because the direct flight from Barra is full. Visiting health specialists can no longer visit. Fears have also been voiced that urgent blood products might not make it from Stornoway to Barra in time.

Compared to the personal impact, the additional cost to NHS Western Isles of sending patients to Glasgow seems unimportant, but it could be considerable, as the health board suggested last week.

Cutting the Barra-Benbecula air service was a bad decision. It must now be reversed before those comhairle councillors and officials end up with more than red ink on their hands.”

What do you say to that?

10:45

I take my decisions based on what I get back through the consultation process rather than on what I might read in the press. However, a couple of those points have already been mentioned.

The need for two rotations from Barra to Glasgow is absolutely clear. We have asked that the Government consider dealing with that through the public service obligation, but the Government’s response was that, due to restricted resources, it cannot consider increasing the PSO.

We are in exactly the same position. For example, the recent application for a flight from Skye to Oban was rejected by the Minister for Transport and Veterans because the projected passenger numbers of 14,000 were not enough for the Government to put money into it. We have fewer than 2,000 passengers travelling on the Barra service.

When we talked to the health board, we pointed out that most of the consultation responses were about the effect on health services. We asked the health board to consider whether, if our proposed change resulted in an increased cost of service provision for its budgets, it might come to the table to see whether we could do something together. We actually left some money in the pot so that we could come to a solution with health.

We are not allowed to take advantage of the air discount scheme from the islands to the mainland because, as a public body, we would be receiving a second subsidy if we did. However, as a local authority we were second subsidising every trip that was made for health board services or the enterprise agency.

We are still working on the issue, but I believe that, if we had a system in which all parts of the public sector paid the full cost and the discount applied only to ordinary passengers who were island residents, the system could be made to work. However, we need the health board and the enterprise agency to come to the table.

We are willing to provide our part, but we cannot continue to take away from other services to provide a double subsidy to the health board or a trip for tourists. It was a hard decision but one that we had to take.

To date, has the health board refused to come to the table?

We have had great difficulty in getting a meaningful discussion with the health board. For example, I took up with the health board individual cases from Barra after two ladies spoke to me during the second consultation. When I spoke to the health board chief executive, he said that the board would just send the patients to Glasgow. That is the level of engagement that I have had.

The health board may find that the change has had an effect on its budget, but that is what we said to it. We asked the health board to do a piece of work on the issue and, if the change resulted in £80,000 of additional cost, it could put £40,000 of that towards the air service and we would match that.

Time is short, so we need to move on to the next question, which is from Chic Brodie.

Gentlemen, what discussions have you had with other councils on the west coast in looking at the overall costs? Is Glasgow the centre of the universe—why must you fly there rather than, for example, an airport nearer my home? Have you had any discussions about outsourcing the service? I understand the issue about European state-aid rules on providing a subsidy for commercial purposes, but have you had any such discussions?

Yes, we have, but let me make a couple of points.

First, when we put the service out to tender this time, we made the tender as flexible as possible to see what different answers we might get. We left the matter open to operators to put proposals on the table about providing the service in a different way. Unfortunately, particularly given the need for a twin otter-type plane for the Barra service, only the present operator was near the point—there was one other operator that was so far away that its proposals just did not make sense.

On the wider picture about being more inventive or thinking outside the box about the provision of west coast services, we are feeding into the current HITRANS study on the greater use of rural air space and on how the twin otter planes could be used more efficiently. We know that the way that Ryanair makes best use of its resources is to keep its planes flying and to keep them working. We have unique planes that could go to other parts of the west coast and Highlands and Islands and, particularly when the new planes are available, we should be making more use of them. We are feeding into that study.

There are also discussions through the Highlands and Islands conveners group, and transport is on the group’s agenda almost every single time. We meet eight or nine times a year to discuss such issues.

I suggest that there might be an acceleration of that discussion, with consideration given to having less of a burden on the public sector. I am sure that you are pursuing that.

What basic changes would you like to be made to Scottish Government policy regarding PSOs?

PSOs are very important instruments for islands and for remote and rural communities up and down the Highlands. To have the ability to use them on more routes and in slightly different ways would be a good thing. The protection of them as a tool to make things happen is very important to islands and remote communities.

PSOs are instruments that are used more often than not with some form of subsidy—a PSO is required to be in place for there to be a subsidy—but I believe that there can also be PSOs that do not require subsidy.

Such PSOs are often used to safeguard and give a monopoly position to an operative where services are considered to be so fragile that, if a competitor came in, both companies would cease to function and we would end up with no service at all. PSOs have been an extremely useful mechanism right across Europe, not just in the Highlands and Islands, for protecting air links, road links and, in some cases, rail links.

The mechanism is there to be used. It is a lot more flexible than some people think in what can be done with it. If a subsidy is provided, that has to be done through either a PSO or aid of a social character. Those are the only two mechanisms that are readily available.

As I said to the petitioners when we first heard about the matter, it struck me that PE1472 is inviting us to strike at the very heart of local democracy. There are not many things that right-thinking people can say the Scottish National Party Government has done that are whole-heartedly to the benefit of the country, but the ending of ring fencing of local authority expenditure was one.

Essentially, we are being invited to intervene on a matter that is currently in the competence of the local authority. I do not know what representation Councillors Murray and MacKenzie are within the local authority, and whether they support the administration or are opposed to it. I understand that they are opposition. We have two opposition councillors coming to the Scottish Parliament inviting us to support a petition that overturns the decision of the democratically elected local authority in exercising its due responsibility.

I do not know whether you agree, but—whatever the merits, or not, of the decision—it seems to me that the appropriate remedy, if the people of the islands feel sufficiently strongly about the matter, is through the ballot box at the next set of local authority elections, when they can either return or reject the local authority that has made the decision. Is that a proposition with which you agree?

Absolutely. That is a proposition that we have to deal with at every single election, and it is one that I am very prepared to deal with.

We do not have what I recognise as an opposition in our council. I see an independent council of 31 members, which has a couple of groups within it. I do not recognise the word “opposition”, because we do not have an administration as such. The challenge that I would make to anybody who talks about the choices that we have made is to go to their own constituency and tell people what they are going to do instead. That is the challenge for us all.

This is a tiny question, but it is nonetheless important. Good morning, councillors. What advantages do the subsidised air services operating within the Western Isles bring that are not provided by the subsidised ferry services? Setting aside the information that you have given us about health services, which are hugely important, what other advantages do you see?

They certainly speed up transport for people going from north to south. They make it more possible to do certain activities and return home within the same day.

Ferry services have come on leaps and bounds. I remember when we started the ferry service from South Uist to Barra 11 or 12 years ago. The council paid for it for the first few years to prove the cost. We were using a 12-passenger sea angling boat to take people across—we had used fishing boats previous to that. We now have a crossing four times a day and 20 times more people use the ferry service than choose to use the air service. That tells us something.

The cost of the ferry service is significantly lower even with the subsidy, and ordinary people will choose to travel in that way. Considering the time that is involved in going to an airport and booking in, although the flight is relatively short, there is not much difference between flying and other modes of travel.

The other important thing is that the air services bring accessibility to the islands both ways. They make the islands accessible to people who want to visit them, but—probably more important—the 12 per cent of our working population who work away, many of them offshore in the oil and gas industry or the merchant fleet, are totally dependent on being able to get to work and home quickly. More people are using the services for that reason. Business users use the air services quite a bit, but the public sector uses them less following the removal of the air discount scheme for public sector use.

The statistics show that people are using the air services. As an authority, we use them, although we are using them less than we did in the past because the 40 per cent discount was really important to us. The removal of the air discount scheme for the public sector has had an impact and, over time, if things continue as they are, the number of people using the air services will decline to the extent that most of the routes in and out of the islands will be commercial routes. Those routes are subsidised through the individuals using them, but they are nonetheless run as commercial operations and if they do not have the load factor that they are looking for—it is not 25 per cent; it is more like 60 per cent—those services will be considered to be marginal.

Are there any proposals to monitor the health and economic impacts of the decision to withdraw the subsidy? We have heard evidence that people with hospital appointments, medical appointments and other issues may find it more difficult to get from certain areas to the areas where they receive their treatment. The economic impact on the islands is also important. In our earlier discussion, we spoke about the population size of the Western Isles. Could the withdrawal of the subsidy potentially have an impact on the repopulation or the existing population of certain remote areas in the Western Isles?

Our economic development department is continually monitoring that. The commerce group is also conducting a study into the economic effect on Uist businesses of the loss of the air service on Mondays and Fridays. We are getting that information fed back to us.

We also have a continuing discussion with community councils and councillors. Two weeks ago, I was down in Barra meeting the two community councils there. I asked them to come to the table and provide evidence of the real effect that the withdrawal of the subsidy has had. That discussion is going on.

Please do not think that we want this. We are trying to find ways of getting back to where we were and we are keen to build up as much evidence as we can and to find other ways of providing the service. I assure you that that process is on-going. We also engage through community planning and the local office of Highlands and Islands Enterprise to get feedback on whether there has been an effect on business from the loss of the subsidy. The challenge is to equate that.

Is Western Isles NHS Board involved in the discussions, given the potential additional cost to the health board of transferring patients to the mainland instead of taking them to Stornoway? Have those additional costs been included in any assessment by the health board?

There is an open invitation for the health board to feed into that process, which has been repeated several times. The health board is also part of the community planning partnership in which we have that discussion. However, we are not getting figures back from it. For instance, when the issue of the blood that was mentioned in the article that Angus MacDonald read out arose, we approached the health board and we were told that there is no reason why we cannot have a sufficient blood supply in Barra to provide that service. We have to take that as the expert point of view. However, it is fair to say that we are not getting from the health board a breakdown of the additional or marginal costs of providing the service in a different way.

11:00

I apologise for the fact that we have overrun the suggested timings for this item, but I think that everyone would agree that this is an important issue not only for the Western Isles but for island and rural communities across Scotland. Our witnesses have raised some interesting pieces of information.

My view is that it is important that we do some research on the issue. For example, we should look at the consultant’s report that Councillor Macdonald mentioned, which we have not had access to. There are probably also wider issues. I feel that it would be useful to invite Keith Brown to talk to us about the issue at a future meeting, and also to involve the chair or chief executive of NHS Western Isles. We might even want to speak to the managing director of Highlands and Islands Airports, because there are issues for our air services. Whatever happens, if we end up with fewer services to Benbecula and Barra, that will make both those airports more marginal, which is really worrying. Last week, I heard that the catering at Barra airport has stopped because it is not viable to run it any more. The council, which is operating under real constraints, did what it had to do, but that is just a small example of what is happening in relation to the viability of those marginal airports.

I appreciate that members do not necessarily want individual petitions to run and run, but I believe that there is still a lot of meat in this petition and issues that we need to explore. I still have a lot of questions about the next steps, and I am sure that other members do as well. As always, I welcome members’ views.

I support that view, convener. I would rather have the conversation with the minister first, before we focus on issues involving the Highlands and Islands, because the issue is much wider than that. The issue is clearly important to the people who are with us today, their colleagues and people in the Western Isles, but—as I suggested when I said that work should be done with other councils—there is a much bigger issue here. However, we should certainly speak to the chief executive of NHS Western Isles.

I should perhaps have been clear about the fact that we are, of course, talking about two petitions. One is about RET and the other is about air services. Keith Brown is the minister who is responsible for both those issues, which is why I suggested that we talk to him.

I was pleased to hear the convener of the council say that it is looking at ways of getting the service back up and running. However, the difficulty with the health board is clearly a major hurdle to clear.

I agree that it might be a good idea to invite the chair of the health board to appear before the committee. However, it might also be a good idea to write first to the health board to ask why it is not prepared to get round a table with the council and other interested parties.

I am slightly flabbergasted. I have to say that I think that we are worrying at a bone and are straying beyond the remit of the petition when we try to make wider inquiries into this, that and the next thing.

It is fairly clear that the Government has said that it has no plans to review its policy on these matters and that the removal of subsidies by a local authority is a matter for that local authority. I am not clear what we think we are going to achieve by pursuing the issue. There seem to me to be two definitive positions and, therefore, I do not think that any further progress is going to be made. I understand the broader issues that you seek to address, but I am not sure whether they are matters for this committee or matters that another committee that is more directly responsible for such issues should be invited by us to consider and pursue.

The petition before us is worthy of further examination. As Jackson Carlaw quite rightly said, decisions of local authorities are matters for those local authorities. One of the priorities that the UK Government and the Scottish Government have set themselves is preventative spending. If we find that the health board is spending more of its resources off-shoring provision—if I may use that term—from Stornoway to the mainland, that might result in a potential cut in services in Stornoway and the rest of the island. We need to ensure that, when we consider public expenditure, we do not offset expenditure on services that could be provided in communities.

I would like to think that we could examine these matters further, convener. We should follow your suggestion and write to NHS Western Isles to ask why it has not fully participated in the work that the council has done and what additional costs the health board has borne as a result of having to transport people from Barra and other areas in the Western Isles to mainland hospitals to access services that could potentially be better provided on the islands themselves.

I agree with John Wilson. It is imperative that we speak to the health board.

Jackson Carlaw makes a good overall point, which is that we have to be constrained by what the petition says. That is something that is always worth bearing in mind in these arguments. My overall point was that there are wider implications, but it is useful that Jackson Carlaw brings us back down to earth by saying that we should stick to what the petition says. I accept that point.

However, looking at the two petitions, it is clear that there are further bits of work that we need to do. With regard to the health board, do members wish simply to write to the chief executive of the health board or do they wish the chair and chief executive to appear before the committee?

I would be keen to write to the health board in the first instance, as we do not want to cause it to incur the additional expense of getting here.

I flag up our important new videoconferencing facility.

That could potentially be used.

The second issue concerns the minister, who has a locus on both petitions. What are members’ views on inviting Keith Brown along?

I would be keen to have the minister along to discuss the PSOs, but I have a separate view on the RET petition. There is an argument to close that petition, given that the Scottish Government has set up a working group to review the large commercial vehicle fares. As that is happening, the petition has done its job and it could be closed.

To be clear, I want to invite the minister to the committee so that we can discuss the PSOs and the air strategy. I agree with Angus MacDonald about the RET petition.

On the RET petition, I thought that a question arose as a result of the discussion this morning. It was suggested that we write to the Scottish Government and ask it to quantify exactly what saving has been made as a result of the removal of the commercial RET. That would be a useful figure to put into the public domain. However, once we have done that, I would not dissent from the course of action that has been advocated.

I therefore suggest that we ask for a look at the consultant’s report, which we have not yet seen, that we ask the minister to quantify the figures, as Jackson Carlaw suggested that we do, and that we deal with the matter at our next meeting with a view to closing the petition at an early stage. I put on the record our thanks to Gail Robertson and the others, who have highlighted the issue in relation to the Western Isles and beyond.

Do members agree to that course of action?

Members indicated agreement.

On air services, the conclusion is that we need to continue the petition so that we can get some information from NHS Western Isles, and that we should invite the minister to come to a future meeting of the committee to talk only about the air services petition and not about RET.

Do we agree to do that?

Members indicated agreement.

I thank members for spending such a considerable amount of time on these two important petitions. I particularly thank our colleagues from the Western Isles, who gave up a lot of time to come here and had to make an overnight stay. I hope that they will get home this evening.

I suspend the meeting for one minute to allow the next petitioners to take their places.

11:09 Meeting suspended.

11:11 On resuming—

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CalMac Ferries (Wi-fi) (PE1473)

The committee will now take evidence from CalMac Ferries Ltd and NorthLink Ferries Ltd on PE1473 by Frances Anne Gillies, on behalf of Barra Youth Council, on wi-fi on CalMac ferries. Members have a note by the clerk, which is paper 4.

I welcome the panel. I am sorry for delaying you, gentlemen—as you probably picked up, we were having quite an intensive debate. I am sorry that we have overrun on time.

From CalMac, I welcome Roger Willison-Gray, who is the information services director, and Robbie Drummond, who is the group finance director; and, from NorthLink Ferries, I welcome Stuart Garrett, who is the managing director, and Steve Moreton, who is the information technology manager.

There is no opening statement. For ease, I intend to divide up the questions between CalMac and Serco. The first set of questions will be for our CalMac witnesses. When will passengers on CalMac services get wi-fi?

As we set out in April, we are in the middle of the process. We have tendered for extending wi-fi across the network. We think that the contract will be awarded some time in August and that the roll-out will take place at the back end of this year and into January or February of next year.

I take it from the nature of the geography on the routes on which your 29 vessels operate that you are looking at satellite services. You mention some other means, but I presume that, on many occasions, 3G will not reach across the Minch.

Satellite is not feasible on all of our vessels because of their size. In addition, there would be substantial operating costs associated with satellite for what are relatively small passenger numbers.

The larger vessels on the longer routes will have satellite. We have a pilot for the new satellite technology under way on the Lord of the Isles and we will shortly have one on the Clansman. The remaining vessels will use a variety of technologies; mostly, they will use high-speed meshed wi-fi, so there will be ship-to-shore communications and wireless access points on the vessels. The backhaul will be through the fixed line network at each of the locations.

So what is the reality for passengers who use a 40-minute service, such as the one to Tarbert that I used a few weeks ago? Will members of the business community and tourists get wi-fi once the pilot is up and running next year?

I should point out that this is a multi-million pound investment, involving 29 vessels, 26 routes and 54 locations. It is a complex network that will take time to roll out. However, once everything is in place, we will use the network to provide services such as ticketing to our vessels and, as a result, all the passengers on the vessels will have access to wi-fi. Currently, we have no plans to charge for that.

11:15

To be clear: will all passengers on all vessels on all your routes have wi-fi once the system is up and running next year?

That is absolutely the intention, and ports will have it as well.

Thank you for that. I throw open the discussion to my colleagues.

I travel regularly to Norway, and it has been the case for a while in Norway that wi-fi has been available on most ships, even small local ships or ferries. As we know, NorthLink has already introduced wi-fi on the services to the northern isles. I am glad that CalMac is getting there, but it is unfortunate that you are a wee bit behind.

Your statement on 8 March indicated that the roll-out of on-board wi-fi involves

“significant technological challenges and costs”.

Can you outline what those challenges include and how much the installation of the new communication system might cost? You mentioned a multi-million pound cost, but I presume that it is not too high.

It is a competitive procurement. It is an outcome-based tender—a full Official Journal of the European Union tender—and therefore I cannot give you a price, because it will depend on the bids that we receive from the six qualified bidders. Obviously, I cannot comment on the procurement process until it is complete.

In terms of technology, all I would say is that it is unfortunate that BT and other providers of infrastructure to the Western Isles are unable to offer the same level of service that is offered in Norway. The limitation for us is not the technology on our vessels but the inability to communicate from places such as Barra, where, as I am sure you are aware, there is no mobile signal.

There is, but it depends.

Even in Lewis there can be the lack of a signal, as we found out to our cost in the past few weeks. The Rural Affairs, Climate Change and Environment Committee has very much taken that issue on board and is looking at it in depth.

Good morning, gentlemen. My question is to NorthLink Ferries. What was the cost of installing on-board wi-fi on your ships? Did it make economic sense to charge passengers for the service?

The total cost was less than £100,000. It was part of a large refurbishment programme, so it was a programme of works. There is no charge for wi-fi on our services.

I have another question for Serco NorthLink Ferries. By what means do you monitor passenger satisfaction with the on-board wi-fi service?

We introduced individual servers on each of the vessels and in each port location in addition to introducing wi-fi and expanding the local area network—LAN—in each of the ships. We are able to capture individual log-ins and upload and download through the servers.

We have separate customer satisfaction surveys available on board. To date, while there are, as ever, intermittent issues with wi-fi, there has been no issue of significant or even limited concern about the wi-fi provision.

Can you outline some of the key comments and concerns about the service from passengers who have perhaps filled out some of the customer service forms?

When there is a satellite-related issue and there is no service—or when the down-station, as it is referred to, has loss of productivity—that is entirely outwith our control. What we do find, though, is that issues in relation to wi-fi connectivity are often down to the user and the individual device that they use. There are certain proprietary brands of wi-fi and hand-held equipment in particular that perhaps do not connect as well to external wi-fi systems as some other types of equipment.

I will bring in Steve Moreton—he is the IT whiz kid here, so he can perhaps take the scales from our eyes. Am I right in thinking, in my amateur view, that satellite is the main solution to the problems with providing wi-fi on vessels?

Yes. Because of the routes that the ferries take, they are significantly out of the line of sight of the shore. That produces the same issues that CalMac has discovered: there are certain routes on which we just cannot afford to rely on shore-based connectivity. Most ferry companies do indeed use satellite.

I had a quick look before I came out today, and I saw that there are a number of companies that would provide you with satellite fairly quickly. If the committee was visiting Antarctica tomorrow, they tell me that I could get fast broadband speed using satellite and modems. I am obviously taking a very amateur view, and it is much more complicated when you are running a fleet, but it is technically possible. How long have you been providing wi-fi on your three vessels?

We have been doing so since the beginning of the year—since the reboot. There was already a limited wi-fi system in the ships from the previous NorthLink company, which also used satellite communication. I am not sure how long that had been on board.

Perhaps Jackson Carlaw can direct his question to both groups of witnesses.

Serco already blocks access to sites such as BBC iPlayer simply because of the potential scale of bandwidth usage. Is that likely always to be the case? Is it a permanent position? Does CalMac expect that to be the case? Would you also not give people access to things such as iPlayer because it would be very expensive or because it would overutilise your service availability?

The data rates that are associated with videostream exceed the capability of the satellite.

Can you identify the commercial cost of providing that service, if only to illustrate how unfeasible it would be?

If we went for the satellite equivalent of a leased line, we would be talking about tens of thousands of pounds a month.

And that whole cost would have to be borne by somebody, so the investment would simply not be justified.

Correct.

I would expect CalMac to take a similar view.

We have the same view. There is a question around providing reasonable access, which has to be managed.

There will be so many other wonderful things that people can do on board anyway that they would not need to sit and look at BBC iPlayer, I assume you will assure us.

They could go for a coffee.

Good morning, gentlemen. Mr Drummond, you said in answer to a question from the convener that installing wi-fi is your “intention” rather than saying, “Yes, we are going to do it.” Is that intention inhibited by your contractual arrangement with the Government?

We are going to do it.

Okay. I know from my business experience that one sometimes has to take a risk and invest in projects to attract customers.

In your press release of 8 March, you state:

“Where there is sufficient capacity and network coverage this will allow us to deliver ‘Wi-fi’ services to passengers.”

Given that the Government has a large focus on tourism, how far are we being constrained by not providing such a service to tourists?

I am not sure that I am qualified to comment on that. We are installing wi-fi primarily for the safe and effective operation of vessels and to manage our processes better. As an outflow from that, we will be able to give passengers access, which would clearly improve their experience. We would hope to gain additional revenue from that, but that is hard to quantify.

Perhaps I can help by asking NorthLink a question. Having successfully introduced wi-fi, do you monitor passenger satisfaction with the on-board service? If so, can you comment on or highlight any concerns that passengers have raised in that respect?

Looking at individual ships and ports, we track the number of log-ins on a monthly basis. On the MV Hrossey, for example, the log-ins numbered 2,712 in May, 3,064 in June, 3,297 in July and 3,644 in July. Those figures show an incremental use of the facilities that tallies with the increase in traffic during the summer months.

Which would indicate customer satisfaction.

One would hope so, yes.

I have some questions for our CalMac colleagues. Did I hear you correctly when you said that the contract had to be advertised in the Official Journal of the European Union? Is the contract of that scale? In my experience, such contracts are normally over £4 million.

No. The threshold is £195,000 but, as I am sure that you are aware, there are complexities around what you can and cannot do. Part of the reason for advertising the contract is that our existing network supplier has been in place for 10 years; in such cases, it is good practice to go to market, so we would have done this anyway.

We also want to ensure that we attract the best potential suppliers. As I have said, the issue is technically complex and we have attracted a number of potential suppliers who are able to work in very challenging environments.

I realise that you do not yet have the tender prices but, whatever the final cost is, will the funding come out of the CalMac group’s current capital programme, or are you getting any extra money from the Scottish Government?

It is coming out of resources from the Scottish Government.

Right. If for the sake of argument it costs £4 million to provide the contract, all those funds will come directly from the Scottish Government and not from your existing budget.

It is part of our existing budget. It will not come out of capital budgets; it will be revenue spend.

So what percentage of the project will be funded by the Scottish Government and what percentage by CalMac?

It is being funded out of the resources that we are getting from the Scottish Government. It is not ring-fenced funding; it is funded from our block grant.

Okay. Is it additional funding? Do you want to write to us about this?

It is part of the funding package that has been agreed.

I will bring in Chic Brodie in a second.

If I understand it correctly, the current arrangements to cover your various routes across the Highlands and Islands and the rest of Scotland were extended by three years. Is wi-fi provision going to be a condition of future tenders, or is it a condition of the current arrangements to provide the service?

It is not conditional on the current contract, and any future contract is clearly a matter for Transport Scotland.

So that is a question for Transport Scotland. I imagine, however, that it would be quite sensible to make it a condition of future service provision, not least because you have already provided the services.

I believe that you wanted to come in, Mr Brodie.

If I may, convener.

I have to say that I am astounded: not five minutes ago you said that you would deliver a capital programme, but now we hear that you do not know how it is going to be funded.

It is fully funded. In any case, as my colleague has explained, it is not a capital programme; it is a service-based contract—

So how much are you going to spend, Mr Drummond, given that your contract lasts for another two and a half or three years? You must know what the cost of the investment is likely to be and which budget it is going to be sourced from.

As this is not investment but service-based provision, we are talking about the amount that we will pay each year to the service provider, which will replace the amount that we are already paying for our full technology platform.

This is not just a case of putting wireless on to the vessels; this is a full technology programme right across the group from our head office to our ports and vessels, part of the aim of which is to increase efficiency in executing and managing our business. One of the added benefits is that we can offer this additional facility to customers.

What is your budget figure? What have you estimated it will cost you?

It is well into seven figures, but we will not have that information until we get the responses back from providers. I do not think that it would be right to put that out.

From wearing other hats, I know that even though the tender process is not complete the custom and practice are that finance directors will have given you a figure for what they expect the cost to be. What do you expect the cost to be?

If we were outside procurement, we would be willing to answer that question. I have no desire for the people who are bidding for the contract to know what our budget is at this stage.

You raised your eyebrows, Mr Carlaw. I do not know whether that means you want to ask a question.

I am sorry, convener—I was merely indicating that I was in full sympathy with you there.

11:30

I have what might be seen as an operational question for CalMac. Can the installation be completed only when the ships are in for refurbishment or refit or can it be done at any time?

That is an interesting question. The short answer is that it will depend on the supplier’s bid. Our desire would be to have all the vessels fitted during the dry dock period, and therefore to be fully tested and go into service following their annual overhaul. The complexity is that the annual overhaul programme begins in September and completes in March, and it is likely to be November by the time the contract award is mobilised. We are targeting March for the roll-out, but the feedback from suppliers is that doing 29 vessels in less than three months is optimistic.

It is likely that the core network—the central switch part of the network—will be installed by the beginning of next year. We expect the port offices and slipways, including wi-fi, to be operational around March or April. As for the vessels themselves, some will be operational in the first quarter and some may get delayed until the second quarter—particularly those that have to be done while in transit. During that period, some of our vessels will be operating 24 hours a day, with two crews on board, which presents particular operational challenges in putting access points in passenger areas and crew quarters.

I expect that we will have fully completed the roll-out by June of next year, and we will endeavour to do it as quickly as possible, but it will depend on the suppliers and there is obviously a price sensitivity. If somebody says, “Yes, we can do it by March, but it’ll be three times the price,” we will clearly have to take a commercial decision on whether that is appropriate.

I am a bit confused. I understood from the initial statements that it would be done in January or February.

That will be the start of the roll-out programme, but it depends on what the suppliers come back to us with. It will be delivered not all at once but as a series of rolled-through deliveries.

We can set an aggressive programme, but the bottom line will be whether the contractors can deliver to it and achieve best value for the Government. It would not be prudent for us to accept a ridiculous price point to get it in by March.

The sooner the better. As someone who travels on the Isle of Lewis vessel, I know that it is quite frustrating not being able to get on with work when you are travelling between Ullapool and Stornoway.

We accept that.

Will some vessels not be available for certain periods because of the wi-fi work that is being carried out, or can that work be done when they are in transit?

It depends on the vessels. Not only do we have 26 vessels, but no more than two of them are of the same type and configuration, so we have 13 pairs of different vessels with different layouts. Some can be done in transit and some cannot.

The majority of the smaller vessels do not operate after about 10 o’clock at night and there is no resident crew, so they are relatively easy to do. Where there are resident crew on board, it can be much more complex to work around legal rest periods and other interruptions. We will put in the best optimised programme that we can at the price point that we think is acceptable and represents good value for the Government.

Is there a likelihood of any interruption for customers? That is the point that I was trying to make.

No, we will not be taking vessels out of service to fit wi-fi.

For clarification, are you saying that all vessels, including the three reserve vessels, will be fitted with wi-fi by June 2014?

As I said, there is a caveat: it depends on the award of contract and on the schedule that the suppliers provide, but we believe that there is no reason why we cannot achieve it by June of next year.

For all vessels?

Yes, for all vessels. The only caveat is around the timing and the practicality of getting the programme completed.

A thought has occurred to me while listening to Mr Drummond—perhaps he can clarify whether it is an uncharitable thought on my part.

From what I have gleaned so far, my understanding is that you entered into the programme because wi-fi is a service that you want to provide in its own right. Given your response, is the programme in fact an incidental benefit that arises from the much wider solution that you are seeking to implement across the entire business, including the head office and other facilities, and a part of the wider look at your provision, rather than because providing a wi-fi service in isolation emerged as an objective that you particularly sought out? Was it conditional on the wider service solution that you were trying to provide that wi-fi had to be a feature of that work or, had that not been the case, would wi-fi still be something that we would hope that you would do rather than something that you were committed to doing?

Absolutely—it is an element of the wider solution that we are putting in place. We are renewing the network right across our business, which will allow us to operate more effectively. We will also give access to our workforce and our customers.

The difficulty does not relate to the system being wireless; the difficulty relates to the network that sits behind it. Our approach is the most sensible way of providing the service as part of a much wider programme.

We are a bit behind time. As colleagues have no final questions, I again thank Barra Youth Council for its excellent petition. The members who visited Stornoway will recall that the three women gave a first-class presentation on the petition. They showed great initiative.

I do not know at what stage CalMac’s plans were or whether the petition helped develop its ideas or whether it was planning to introduce wi-fi anyway. Nevertheless, I will be charitable and say that I am glad that CalMac is going ahead with the service.

It seems sensible to close the petition, under rule 15.7, on the basis that CalMac has initiated a networks project and that it will conclude that process as soon as possible. Do members agree?

Members indicated agreement.

I thank our four guests for coming along. I am sorry that we have delayed you. Some of the questions were technical, and others were financial. Your responses helped the committee to understand what Serco NorthLink is doing and what CalMac is pursuing. Both are very important companies in relation to the development of ferry services in Scotland.

I briefly suspend the meeting to allow a changeover of witnesses.

11:37 Meeting suspended.

11:38 On resuming—