Official Report 326KB pdf
Good afternoon and welcome to the meeting. The first item of business is on the tendering of ferry services for the Clyde and Hebrides. I welcome Tavish Scott, the Minister for Transport and Telecommunications, and his group of advisers: Graham Laidlaw, David Hart, Jim Logie and David Dow.
Were they sent to us in the post?
Mine were delivered to my desk; I do not know where yours went.
On a point of procedure, convener. The Official Report of our meetings is not normally available for about a week. Would it be possible to see whether the report of the part of our meeting today relating to Caledonian MacBrayne could be made available tomorrow morning to all members of Parliament and others who express an interest?
I am certainly prepared to explore with the official report whether it has the capacity to produce that. If it has, the request is reasonable, so we will pursue it.
My understanding is that all members should have had a copy of the documents delivered to their office on Monday morning. I apologise to Mr Davidson if that did not happen; I will look into it. As far as I can tell, the majority of committee members had them delivered.
I will start with a couple of questions. You said that the UK Government has been given a pre-infraction letter in relation to compliance with EU law. The STUC wrote to you recently encouraging a delay in the final decision, pending its visit to M Barrot's office on, I think, 27 September. Why is it not possible to comply with that request? If there were material changes in circumstances following the meeting, would the Executive be able to take them on board?
I appreciate the STUC's interest in the matter. I met representatives of the STUC before I met Commissioner Barrot in July and I will meet them again today. I thank them for all the constructive work that they have done on the issue. However, I have found no indication in all the analysis that I have done that the Commission is likely to change its mind. In fairness, the Commission has been entirely consistent, not just in the past 12 months, but in the five or six years since devolution. That has not been only in dealing with ministers and the STUC, but right across the board. Indeed, some members who are sitting in this room have also met the Commission and been given exactly the same message. It is important to reflect on the fact that the Commission has been straight in its approach.
I have a second question before I bring in my colleagues. The concerns that the STUC has expressed come from two angles. First, many of the employees are islanders themselves; they depend on the services and live in communities that depend on the services.
If I may, convener, I want to reflect on the degree of concern that existed last November and to suggest that we have made a lot of progress in addressing the issues in relation to employment rights and, indeed, pensions. I can say no more than that we will absolutely find the mechanism to ensure that the pension arrangements for Caledonian MacBrayne staff will be guaranteed in the future. Their position is, I hope, strengthened in that regard. I am determined that that is the case.
I will bring in other members, but I may want to come back in later.
As the minister knows, I have been pursuing the issue of the occupational pension fund for some time. In case he was referring to me in his remarks about the member who was peddling nonsense, perhaps I should point out for his benefit that, since last Friday, when I put out the press release to which I suspect he referred, I understand that CalMac's management, many of the directors of which are also pension trustees, have confirmed that every single word in that press release was factually accurate.
Fergus—
To come to my question, there are three different methods of assessing a deficit. One is the winding-up method, which produces a figure of £25 million. The second is the past-service method, which yields a deficit of about £6 million. The third is the method that I quoted in my press release, which results in a figure of around £8 million. CalMac has a plan to reduce the deficit. Have you a plan to reduce the deficit and, if so, what is it? If you have still not produced a plan, how can the tendering process go ahead without the pension trustees being completely comfortable?
I wonder what would have happened if I had done all the things that Mr Ewing has asked me to do, even if I had been able to do them. If I had done them all weeks or months ago—or rather, if another Executive minister had done them months ago; I was not in the job then—I wonder what Mr Ewing's attitude would have been towards me or towards that other Executive minister. I have no doubt that, at the first possible press release opportunity, he would have accused us of presumption and of treating the Parliament with contempt, among other allegations.
I did not say 1,000, but—
You did, and the Official Report will reflect that. [Interruption.]
Fergus, let the minister respond.
Mr Ewing is factually wrong in that regard.
I will allow Fergus Ewing one more question before I bring in other members. I will come back to Fergus Ewing later if he has more questions.
Earlier, the minister said that staff's pension rights
I will answer the question in my way, not in the way in which Fergus Ewing would want me to answer what is a loaded question. The answer is that my attention is on the pension rights of the men and women concerned. The successful tenderer will be required to provide actuarially equivalent pension schemes and entitlements for transferring staff. That deals decisively with the important point. Mr Ewing is trying to draw me into directing the trustees of the CalMac pension fund. I will not do that; we will have proper discussions to sort matters out. We will do that in the appropriate and proper way, not in this way.
I will ask you a simple question, minister. Do you want CalMac to win the tendering process?
I want three objectives to be met: I want islanders to get the best lifeline services; I want those services not just to stand still, but to improve; and I want to ensure that the employment rights and the pension rights of the men and women who work for Caledonian MacBrayne are protected. I look forward to the company that can fulfil those three core objectives winning.
Are you saying to the committee that you look forward to an open tendering process and that you hope that many companies submit tenders?
Mr Davidson would be surprised if I did not hope that a tender was of that nature. If we have to tender—that is the requirement that has been placed on us by the European Union's rules—then the process must be fair and transparent and it must above all be seen to be fair to all the companies that tender. Any company that tenders will have to meet the three objectives. I will not go back over those objectives but they are extremely important.
In the—
I am limiting members to two questions initially so that everyone has a fair chance. I will come back to you later.
Minister, you mentioned the pre-infraction letter that has been sent. Clearly that means to you that a requirement has been placed on the Executive. What do you believe will be the consequences of our failure to act on that pre-infraction letter both financially and in relation to the powers that the Executive would have thereafter to control the tendering process?
The final part of Michael McMahon's question is the important part. I believe that this devolved Government and the Parliament would both lose the ability to ensure that the specification is as we would wish it to be in respect of all issues such as lifeline services, improvements for islanders and employment conditions for current members of the Caledonian MacBrayne workforce. That would appear to me to be the worst of all worlds. We would lose our ability to control those aspects and deliver those objectives.
You said that you believe that there might be financial penalties and that they might be heavy. From which budget would those financial penalties have to be drawn?
I dare say that every other minister would take the view that that was the Minister for Transport and Telecommunications' problem and that he would have to solve it from the transport budget. I would not wish to go there.
Minister, it would appear that you are being less than candid with us about the type of regulation that is going to be applied to any new tender. You have mentioned best lifeline services, improvements in the services, employment and the protection of pension rights. Does that mean that you are no longer sticking by paragraph 1.3.10 of schedule 1 of the Executive's draft invitation to tender? That paragraph says:
We have never argued that it is going to cost less. I do not think that my predecessor, any civil servant or anyone else has ever argued that it would cost less. The one point that I concede to the STUC is its argument that the process might cost more. That gives me no pleasure; it is not a particular advantage. I am sure that Mr Sheridan and I could have an interesting philosophical debate on whether the market would in this context deliver what modern financial parlance calls best value. It is simply the case that tendering costs exist, and that ensuring that we secure fulfilment of the three objectives that I outlined this afternoon will cost money—I accept that. I do not disagree with the contention that overall we may spend more money than we did before on delivering the lifeline services in the way that we do. I did not write the European rules—I may have a personal view of them, which I had probably better not express today, but we have never argued that the exercise will cost less money.
On that basis, the academics who have given evidence to us have made the point that given that the whole exercise is going to cost the Scottish taxpayer more money rather than less, the compulsion to tender is a figment of the Executive's imagination, rather than reality. Given that the Executive ignored the academic evidence on NorthLink Orkney and Shetland Ferries Ltd, that it went ahead and tendered and that it then had to spend £13.4 million extra to bail out that failed exercise, are you not in danger of repeating the mistake by ignoring the copious amounts of academic evidence that tell us that there is no compulsion to tender?
That is just nonsense. Mr Sheridan cannot have read a word of the analysis. His example of the northern isles is even more nonsense, because the contract was tendered not just the last time, but the time before that and the time before that, so he does not know what he is talking about. It would help if he did his homework better. Let us be clear: he is mixing up the maritime cabotage rules. There is a copious amount of information in the analysis to illustrate that. He can go through it and believe it or not, but it is the evidence that we have taken. We have performed our own internal analysis, we have produced our own legal interpretation, and we have also received external legal advice on the maritime cabotage regulation. I may not like the regulation, but it does not matter what I think of it—the reality is that it is the European regulation. It might be open to Mr Sheridan to ignore or break European law, but it is not open to any Scottish minister.
I will bring in Bruce Crawford, then once I have exhausted members who have not been in I will return to members who want to come in for a second time.
Thank you, minister, for appearing before us today and giving evidence. Will you confirm that Audit Scotland intends to investigate the robustness of the tendering process that was carried out with NorthLink, how the Executive awarded the contract to NorthLink, whether the Executive followed fair and proper procedures and whether the processes for monitoring the contract were robust enough? If you can confirm that that is the case, should we not wait to learn lessons from Audit Scotland? I heard what you said earlier about prevarication, and I understand your desire to proceed, but there may be good lessons to be learned from Audit Scotland's examination of the contract that was awarded to NorthLink.
I do not know what Audit Scotland has said today; I think it will be in front of the Finance Committee this afternoon. I know that it is going to conduct an inquiry, and I state on the record that I welcome that. No one would be more pleased than I if it could report quickly enough for this process. I will welcome any recommendations that it makes on the tendering process and if it sets out its work plan to the Finance Committee this afternoon, we may find that it can achieve that, which would not slow up any of this process. That may be possible, and it would genuinely be a useful exercise for us all. That is all I can say on that matter.
I have more questions for later, convener, but I have one final one for now. I have not had the chance to examine closely the difference between the NorthLink ferry tender process and the one that is proposed for CalMac but, given that we have an on-going investigation by Audit Scotland, the issue is germane. Leaving aside public service obligation requirements, how similar are the tender process that was carried out for the NorthLink ferry services and the one that is proposed for CalMac?
That depends on what Mr Crawford means by "similar". If he is talking about the Government processes rather than about the handling of the contracts, I should point out that there is an appropriate separation involving the team that assesses the bids. However, I believe that the Audit Scotland investigation will—rightly—examine all those process issues and come to a clear judgment and make clear recommendations on the effectiveness or not of those processes. I should also make it clear that, if those recommendations are made within the timescale that I understand will be applied, we will have plenty of time to accept and deal with any appropriate comments on the processes that we follow.
On Professor Kay's five-part proposal, you say in your report:
If it is acceptable to Sylvia Jackson, I will ask David Hart to deal with the detail of her question. However, I point out that paragraph 12 of the paper already goes into the matter in a lot of detail.
I note that the correspondence between the Executive and the commissioner for transport suggests that the possibility for discussing a way forward remains at the Executive's disposal. However, neither that correspondence nor the briefing pack appears to include any exchanges in which Executive officials have set out specific creative proposals for taking the Commission up on the offer of finding a way forward. Where is that evidence? The information that we have received shows only that there has been correspondence between the Executive and the Commission, not that any specific proposals have been made to and then completely refuted by the Commission.
The numerous proposals for alternatives to tendering in the consideration of requirement to tender document were shared with the Commission, discussed, debated, analysed and tested against the criteria for the maritime cabotage rules. We thought it best to illustrate that simply in the document by going through all the options that have been proposed by the committee, academics, the STUC and so forth and to show them in that context. I assure Paul Martin that those proposals were discussed option by option with European Commission officials in the transport commissioner's department and that the officials were clear in their response to all of them.
I appreciate that you deal in the document with a number of the academic proposals. However, given the wide range of academics who work for the Scottish Executive, is there a particular example of theirs that you can advise us of today that was proposed to the commissioners and dismissed in an exchange of correspondence?
The two slightly newer proposals were, first, the subsidy-for-all option and, secondly—this one might raise eyebrows in some quarters—the option for the Scottish Executive to take the whole service in, making all the employees civil servants and putting the transport minister in charge operationally. That is a highly scary thought for me and was not considered appropriate for perfectly good and sensible reasons.
I have one final point.
I am limiting everyone else to two questions, Paul, so I will be consistent with that. Fergus Ewing is next.
My question relates to the substantial paper prepared by Steer Davies Gleave, which I had the chance to read only this morning. The minister warned us that, if the CalMac services are not put out to tender, there might be horrendous consequences, such as the cessation of services and fines. However, from my first reading of the document, it appears that there are directly funded services in Finland, but the plan there is not to move to tender for at least three years, and that, in the case of Malta, there will be no move to tender until 2010. In the Netherlands, there is free use of ports and other facilities and the legislation is not expected to be in place for another four to five years.
Frankly, I resent the accusation that we have not looked at the matter very carefully. We have spent the past year working very hard on it and for that to be airily dismissed by Mr Ewing's rhetoric is insulting to the people who have worked hard on the issue over time. I do not accept the accusation.
I will respond to that briefly. I note that the minister did not refute the specific extracts that I read from his own paper. He mentioned the Spanish case. Dr Paul Bennett stated in his evidence to the committee that, although the Spanish were found to be in breach of the rules and were initially fined, not one penny piece of the fine was paid because there was adjudged to be no overcompensation. No ferry routes were suspended. If there was an infraction, it was an infraction without consequences or penalties of any kind. My point is that it is wrong to exaggerate the threat and to create a bogeyman given that, even when it was found that there was an infraction, not one penny piece was paid and not one ferry service was cut. Is that not a legitimate point?
Mr Ewing is wrong. The Scottish National Party's position is to break the law. Everyone who lives on an island that the Clyde and Hebrides services serve will recognise that the SNP's position, articulated today by their spokesman Mr Ewing, is to break the law.
I take the minister back to the response that he gave to Dr Sylvia Jackson and his comments on the subsidy-for-all approach. In looking for efficiencies, has he considered not only efficiencies in the running of the services, which are obviously important, but efficiencies in the costings? Some of CalMac's vessels will need to be replaced, which will be an expensive exercise. Has he considered the possibility of having smaller bundles, which would make it more attractive for companies to come in? I accept that there must be reserved vessels and so on to maintain a service; I am not arguing that every route could be run on standard vessels. There is no dispute that the service must be maintained, but has the minister considered smaller bundles to attract more competition into the marketplace, while guaranteeing that the services are at least as good?
I do not wish to be disrespectful to Mr Davidson, but, to find the answer to his question, he could do no better than travel on a wide variety of the Clyde and Hebrides services. Three or four days of travel this summer convinced me that the approach that he suggests would not work. If I needed convincing before, I certainly did not need it after spending time on the services. I honestly do not believe that it would be possible to break up the network in the way that he suggests without causing considerable and genuine difficulties in relation to our objectives for the services, for islanders and for the men and women who work for the company. I believe that the disruption would be considerable and that those objectives would be put at risk. I can only suggest that Mr Davidson uses his holiday next summer to go on what are fine services, whose integration is the important aspect of ensuring that our core objectives are met.
In fact, I was on the MV Bute before your good self and I travelled on various other services with CalMac. I am asking about your proposal for tendering and the way in which the services have been bundled. My question, which you have not answered, was whether, at any time, you had considered smaller bundles.
No.
Why not?
As the minister, I have not considered smaller bundles because I do not believe that that would achieve the three objectives that I think are important for the future of the service. I do not want to go over all the reasons again, because we have done that, but I do not see any advantage in breaking up the CalMac network.
What assurances will you—either directly or through Caledonian MacBrayne—be able to give the onshore staff who work for CalMac that their future employment will be protected under whatever tendering procedures you proceed with?
The assurances that we can provide are the same for shore-side and sea staff, which I think is as it should be. It is particularly important that the operational effectiveness of the service is not compromised by change, in particular with regard to the ticketing offices and some of the mechanisms that Caledonian MacBrayne currently operates where it has ticketing offices. Let us be honest: there are important employment considerations in the places where those offices are. I can certainly give the assurance that the men and women who work for the service, both onshore and at sea, will be dealt with in the same way.
It sounded as though you protested too much in response to my earlier remarks, minister. The evidence that the committee has heard from academics is to the effect that the Executive does not understand EU law. You may accuse me or us of not understanding EU law, but the academics' evidence is that the Executive does not understand it. Sylvia Jackson asked you about Professor Neil Kay's paper and I remind you that Professor Kay had no hesitation in saying that there is no basis at all for your claims about the break-up of the routes and the possible infringement of the Transfer of Undertakings (Protection of Employment) Regulations should his suggestion be followed. Are you saying that you have complete confidence that the academics' conclusions are wrong and that the Executive is right?
Mr Sheridan may express it that way if he wishes. I believe that we have made the best analysis of all the options that were presented. We have taken internal and external legal advice and we have discussed the matter with the Commission throughout. The issue has been relevant not just this year, but over the six years since the Parliament came into being. I am recommending a course of action. I cannot add to that.
I know that you dismissed the NorthLink Ferries example, but it was raised because the academics advised us that there would be serious consequences if your tendering process for the NorthLink routes was followed through. The Executive's response at the time, which was similar to yours just now, was, "We don't foresee that as a problem." Some £13.4 million of public money later, we realised that there was a problem.
Mr Sheridan is mixing up a financial argument about tendering with the requirement on the devolved Government to comply with the maritime cabotage regulation and European law. He may continue to do that, but I will continue to point out that there is a difference between those two issues. I may like or dislike the maritime cabotage regulation—I may have my own view as to the consistency with which European policies deal with different modes of transport—but neither I nor any other minister can ignore the facts of the regulation.
Let me pick up on that last point before I proceed to my main question. I thank the minister for reiterating his position on the Audit Scotland report on the tendering process for NorthLink Ferries. If that report says that the Executive's process was flawed to such a degree that it causes concern for Audit Scotland, will the minister reconsider the tendering process for CalMac?
Of course I would investigate the processes involved. Depending on the recommendations, the issue might involve more than just NorthLink Ferries or CalMac. If Audit Scotland makes recommendations for improving the process, any Government should respond to those.
I just wanted to ensure that I had that on record.
Indeed, that is one of my concerns about the whole process. I think that I tried to make that point in response to an earlier question from, I think, Mr Sheridan. We have never argued that the European Union's requirement under the maritime cabotage regulation to tender the services will either save us money or be cheaper. We are required to bear the costs for the system that the European Union has laid down for subsidised ferry services in all member states. We may have a view on that—I can assure Mr Crawford that the Executive has a view—but that does not alter the fact that we need to comply with those costs.
Let me just be absolutely clear about that. If the costs were to reach ridiculous amounts—for instance, £1 billion—would the Executive still pay those costs because it is required to do so by law? Would it not tell the European Union, "Hold on a minute, this is getting out of hand"?
If the costs reached £1 billion, even I might start to question the level that had been reached. We will continue to look for improvements to the system through the appropriate channels. Do not believe that, just because the system is in place, the Executive does not have a view on how it might be improved and refined. I will work hard on that matter. I can see where Mr Sheridan and you are going on the matter and, no doubt, your press releases after this meeting will say that we are prepared to spend any amount of money to comply—
It is ridiculous—
There you go—he has got his press release out before the meeting has even ended. No change there.
I do not expect that you would do that, minister—
That is what your party thinks that we should do.
I do expect you to do something, though. You have just set a potential limit of £1 billion—
Oh, come on.
You have said that you would question such an amount. If the Executive is prepared to question the amount at that level, at which point below it will the Executive say, "Enough's enough, we can afford to go no further"?
If that is your line of argument, Mr Crawford, it is clear that you have never been in a decision-making position in relation to European matters. I know that you have had a lot of local government experience and I am sure that you opened a lot of tenders in the past—
This is not just about the tender price, though.
Let me make my point. Like all of us who have worked in local government, you will have dealt day in, day out with issues of contract compliance and so on, so you can exaggerate the case as much as you want to, but I know that you are aware of what happens in such a process. We will do our best to ensure that we minimise the costs. That is my commitment to the committee.
In answer to several questions, minister, you have indicated that you might harbour concerns about the maritime cabotage regulation. I recognise that the way in which the Executive proceeds depends on the vote in the Parliament tomorrow, but do you know whether the Executive intends to press the UK Government to do something about updating and reforming the maritime cabotage regulation so that the rules make more coherent sense in relation to the way in which they apply to lifeline services?
You can be sure that I, my predecessor and every former minister with responsibility for transport in the past six years have reflected on what we have had to deal with in relation to these matters. You can also be sure that I will seek to take the issue forward in a constructive manner.
Paragraph 3.21 of "Research and Advice on Risk Management in Relation to the Subsidy of Ferry Services" talks about Finland, which Fergus Ewing mentioned earlier. It says:
David Hart will be able to lay out the timescale for tendering. However, it is important for me to say that, if the Parliament accepts the requirement to tender tomorrow, we will not be tendering on the Monday of next week. There is a process to be gone through. As the committee will know, there was a considerable consultation exercise on the services earlier in the year. I consider it important that islanders should be involved in that and that interests in the islands have an opportunity to ensure that they are comfortable with both the timescale and the process that we are following. My recollection of the situation is that, following the normal process of tendering, we will not be in a position to award a contract until well into 2006.
Our current timetable envisages that the time from the launch of the process, which would be the publication of an advertisement in the Official Journal of the European Union, to the point at which the new contract started would be in excess of two years, which, if we were to start now, would take us into late 2007. We would probably award the contract before that, as there has to be a lead time for implementation. Our estimate of two years is not hugely out of line with the Finns' estimate of three years.
Given that this is 2005, that means that it will be 2007 before open tendering goes through. What does the Scottish Executive mean in paragraph 3.21 of its risk management research paper when it says that it wants to "ensure maximum efficiency"? What kind of things is it thinking about?
If you are interested in that point, I would be happy to ask the researchers for more detail. You have the report as it was given to us; we have held nothing back. If you are particularly interested in that subject, I would be happy to consult the researchers.
That would be useful.
I assure Sylvia Jackson that we will try to get that to her before lunch time tomorrow. I appreciate that there is a debate tomorrow and it would be fair to give the answers before it.
In response to the Executive's correspondence of 4 May, the commissioner advises that he wants matters to move forward because there are complainants who want the issue brought to a conclusion. Can we identify the complainants? Have we made our concerns known, perhaps through the UK Government, about countries that may not be complying with the requirements of the procurement process?
I am not sure that we know who the complainants are; that information is not released by the European Commission. I do not think that we have been told their identity, either formally or informally. I will check that, however, and make sure that Paul Martin gets a response.
The commissioner says that he wants matters to move forward because he is concerned that the complainants have contacted him and asked him to get the issue sorted out. Do you accept that every possibility has been explored, even though the complaints have been communicated to the commissioner? Surely we cannot just say, "Well, we have received correspondence from complainants, so let's rush the process forward." Are you satisfied that, despite the complainants having been in contact with the commissioner, you have explored every possibility in the time available?
We have gone through the process rigorously. It has not just been about the past nine months; the process has taken several years. I repeat what I said at the outset: the Commission has been consistent on its line since 1999 when the Parliament was established. I would not like to suggest that it has in any way changed its view at any stage.
I am going to draw questions to an end, because the minister has gone almost 10 minutes over the time that he committed to us. I realise that members may wish to raise other points. However, we have a two-and-a-half-hour debate tomorrow in which additional points may be raised to which the minister can respond. I thank the minister and his advisers for attending our meeting.