Official Report 207KB pdf
Once again, I apologise for the topsy-turvy nature of this meeting, but it has been a productive way of getting through our business. Our final item is a paper by the committee's reporters on Highlands and Islands ferry services, copies of which have been circulated. Before we move to a general discussion, I thank Maureen Macmillan and Des McNulty for the work that they have done. I will give them the opportunity to make opening remarks on their paper, then I suggest that we take general comments from members, after which we will take action based on the report.
First, I am pleased with the report. Everyone whom we approached co-operated, and their views were diverse. Although we have not come to conclusions on all the issues, we have pointed out where the differences of opinion might be, so that the Executive can address them. I will not go into detail, because members probably will want to pick up the aspects that most interest them, but Professor Neil Kay, who gave evidence to us, sent us a congratulatory e-mail and said that our report was excellent. I am pleased to report that to the committee.
Des, do you want to say anything before we go through the report in detail?
Just that we spoke to many people. We were particularly well supported by Tracey Hawe in assembling the evidence and putting together the report, for which I am grateful.
I found the report useful. It raised the issues that the committee was veering towards, following the evidence that we took. The report has brought into relief some of the subjects that were dealt with and the areas that we must examine further. I repeat the thanks to Tracey Hawe, who assisted the reporters, and I invite members to comment on the report.
I seek clarification. In "open to public tenders" on the third page, what are the exceptions that are referred in:
That would apply in the context of normal tendering procedures. You are not always required to accept the lowest bid, but if you do not, you are required to provide an acceptable justification, based on the specification that you put forward, for accepting the next lowest bid.
There might also be questions about the viability of the company.
The requirement of such a justification is a fairly standard practice in public procurement to ensure the transparency of the process.
Are we going through the paper section by section?
I am taking only general questions at the moment, but if there are specific questions, we will go through the paper section by section.
I want to support Des McNulty's view that we need to treat the islands as a special case. In my previous life with the National Farmers Union Scotland, I found that the island communities faced huge problems and fought long and hard to have them recognised.
I also record my agreement with Des McNulty's remarks.
After its previous evidence-taking session, the committee felt strongly that we needed to deal with the issue sensitively as the economic and social viability of the island communities depends on the service. That is why we have taken and will continue to take such an interest in the matter. However, I am happy for John Scott to record his support for Des McNulty's remarks.
It is obviously up to the committee to decide how we proceed with the matter. However, we might want to ask the Rural Development Committee also to consider the issue more actively as we continue our own work.
That is a fair point, and I see members nodding in agreement. Perhaps we should work with Tracey Hawe to find out the best way to do that.
I seek some clarification on the regulations on state aid to maritime transport. Are all subsidies that do not comply with the rules unlawful?
That was the answer that we received from European Commission officials when we specifically pursued that question. We were told that there had been previous derogations on this issue, but the Commission was taking a very strong line on phasing them out as best it could. As a result, there was no scope for us to go outwith the guidelines.
So the Government could not simply claim that these services are lifeline services.
No. The officials were very clear that any such action would expose us to legal pressure that they would pursue energetically.
We asked the officials about specific examples such as Brittany Ferries, which receives a subsidy but has not been put out for competitive tendering. However, they told us that that was because a fixed-term contract was involved, and that when the contract came to an end, the company would have to do what we are doing. As CalMac had an open-ended contract, it was open to anyone at any time to take the Government to court over it.
If members have no other comments on that section, I will move on to the section on consultation. Do members have any questions?
The reporters state:
It was suggested that seven or 10 years might be a more appropriate period for contracts. That would provide the operator with greater security. However, if there is insufficient flexibility in the service specification, there is a danger of freezing arrangements. There is a trade-off between the greater control that shorter contracts offer and the greater security that longer-term contracts offer. We did not feel equipped to make a recommendation, but we thought that we should highlight concerns about the five-year contract period and ask the Executive to justify that.
We were particularly concerned that in the Western Isles there is continuing development of ferry services. For example, if a causeway is built, a ferry is no longer required. Operators may also find more efficient ways of delivering services. We were afraid that there was not enough flexibility in the system to cope with such developments and wanted to examine how greater flexibility might be achieved.
As members have no further comments, I will move on to the next section of the paper, headed
Again, I seek some information and clarification. The paper refers to "unmet demand" and provides some evidence for that from other routes. Are the reporters seeking extra information on the degree of price sensitivity? They state that
We do not know to what extent it may happen over the whole network. However, on the Stornoway-Ullapool route a competitor set up in opposition to Caledonian MacBrayne and took away haulage business from it. When that business was taken away, CalMac had spare capacity that was filled up with passenger cars. No one had previously been aware that that traffic had been trying to get to Stornoway. Clearly, there was an unmet need. No research had been done into how much potential traffic there was. That traffic was constrained by the amount of service available.
It is very expensive for tourists to take their cars over to the islands. Given the tourism crisis that is upon us, which may last for a considerable period, the pricing of services is a key issue.
The pricing of services is clearly an issue. It is a bigger issue for regular users of the services—those who depend on them week in, week out throughout the year. Such people experience the cost of services as an economic barrier to their development. Later in the paper we suggest that the problems of frequent users, both as passengers and as business people, should be investigated. People such as farmers and hauliers are dependent on the ferries.
There are echoes of our previous discussion about Highlands and Islands Airports Ltd, in which we talked about the need for the company to be more customer-focused and to increase traffic by being more flexible on flight times. It is clear that the same things apply to CalMac.
The paper talks about reductions in operating costs based on vessel deployment. Are you arguing for the routes to be tendered as one bundle on the basis that, if the operating company has a lot of vessels and a lot of routes, it will have more flexibility and could cut costs through efficiency savings?
It is clear that the way in which the vessels are deployed has a crucial effect on operating arrangements and on passenger revenues. We wanted to highlight that any contract for the operating company must take account of the deployment of vessels and how decisions would be made about when new vessels would be built and what size they would be.
If there are no other comments about that section of the report, we will move on to the section that deals with the regulation of service delivery. I share some of the concerns about the use of the specification for regulation. Perhaps those areas will be expanded upon.
There is an implication that the reporters would be in favour of a regulator for the operating company. Are we going to move towards recommendations in due course, convener? I would like to endorse that view, if it is the reporters' firm view. The precautionary principle should apply. Although there have not been many problems to date, we must put something like a regulator in place.
Recommendations will be made later when we consider how to proceed with the report. The reporters are saying that having a regulator is something to consider and that we need to examine the matter further and come back to the committee with recommendations. Is that a fair summary?
Yes.
Adam Ingram has expressed his views on how he sees the issue and those are noted.
I agree with Adam Ingram that there might be a benefit in having an independent regulator. I would welcome that if it were one of the reporters' recommendations.
I have no opinion on the matter at the moment. I can see both sides of the issue and will be guided by what the committee wishes. We want to find out what the Executive's response to the paper is and to see what it has in mind in the context of our worries.
We are flagging up the need to consider carefully the case for a regulator. That will be dependent, among other things, on whether one bundle or many bundles are being tendered. That will be a key factor in the equation.
Are there any other items on that part of the paper that members want to comment on before we move on to discuss the section on security of service and the need for an operator of last resort? That is a fairly lengthy section of the report and reflects many of the discussions that we had during our evidence-taking meetings as well as the work that the reporters did.
The need for a lifeline support vehicle is one of the most important elements of the discussion. The whole discussion flows from that issue. We need an operator that has the economy of scale that will allow operation of a support vehicle. The whole issue turns on that. Unbundling that, in the worst case scenario, into 58 different routes would be a complete nightmare and simply impractical. The issue is key—it is the starting point from which decisions will ultimately be made.
Do any of the reporters wish to comment on the latter point? I think that the former point is taken as read.
We can see further on in the paper that we want to prepare the ground in a fairly systematic way in case the worst happens. One of the issues that we are talking about is whether the vesco is properly prepared in terms of a safety management system for an emergency situation. We have, in a sense, done some scenario planning. We want the Executive to engage, on the basis of what we are saying, in a more detailed scenario plan.
The Executive has been thinking in terms of a company getting into financial difficulties and not being able to proceed. It has not thought in terms of what would happen and how it would cope if there were a breakdown or some kind of shipwreck or emergency of that sort. We want to get more detail on the Executive's plans.
We have already touched on bundling of services. Are there any other questions or comments on that section of the report? If not, we will move on to local employment issues.
Are the reporters suggesting affirmative action for Gaelic speakers in the recruitment of crew members, Maureen?
Yes, but I do not know whether that will be possible. I am not sure whether the European Commission will allow it, but I think that we should make the attempt. It is important, because Gaelic speakers use the services and there is growth in Gaelic speaking. Somebody told me the other day that they have a child whose first language is Gaelic, and who cannot speak English. That is an absolute turn-up for the books. If there are to be further such developments, we will need crews who speak Gaelic in case of emergency.
Such a requirement must be developed further.
I wish to jump back to multiple ownership of the harbours and harbour trusts, because I did not turn the page quickly enough. It would be a huge task to try to resolve or rationalise the ownership of ports while also resolving the ferry arrangements. I question the wisdom of insisting that ownership be rationalised as part and parcel of the process.
Ownership of harbours was mentioned by the way; I do not think that we have any intention of getting into that matter. It is not something that we have discussed in great depth. We have merely noted the current situation and suggested that it might be reviewed.
With respect, the wording in the report suggests that there was some intention to get into the matter. The paper reads:
We heard a lot of evidence, in particular from Argyll and Bute Council, about the problems that arise from different patterns of pier ownership. Maintaining piers is often viewed as a heavy burden on local authorities, although they have no voice on the operational matters relating to services. It seemed to us that, in the context of service planning, it would be rational to think about boats and piers in the same context. I do not think that we are making a hard recommendation, that boats and piers should all be rationalised under one roof. We do not indicate a final destination for the matter. It would be inappropriate for us to deal with the development of CalMac services in an area to which we will not return for 10 years without emphasising the planning infrastructure problems that were highlighted to us by the local authorities.
Before we move on to the "Next Steps" part of the document, do members have anything else to say?
The issue of the Transfer of Undertakings (Protection of Employment) Regulations—TUPE—is alarming in relation to pension rights. The reporters themselves are obviously concerned about that and I want some clarity on it.
Indeed. The issue of pensions has dominated our discussions on many other public sector matters and we need to keep the pressure on in that regard. I am aware that steps are being taken on that.
Members indicated agreement.
I see that that is correct. Can we therefore agree to the content of the report?
Members indicated agreement.
That takes us to point b), which is to
Members indicated agreement.
That leads us to point c), which is to continue the process and to
Members indicated agreement.
We will forward a copy of the report to the minister and invite her to respond. We should also attach a guidance note on the discussions that members have had on the matter, along with a copy of the Official Report, which will give the minister a further insight into the views of committee members. Is that agreed?
Members indicated agreement.
Finally, we need to judge how we see the committee's role developing. I would like us to stay tied in to the service specification process because the service specification is the document that will determine what happens. We need to ensure that we are aware of how the document is developing. We should leave it to the judgment of the reporters as to when it would be best to bring that specification document back to us. The committee should be well informed on the way in which that process is developing.
On a point of clarification, what is meant by the "draft service specification"? I accept the point about the extent of our involvement, but do we want to take a totally hands-on approach? Would that be wise?
In light of the lack of regulation—the Executive is adopting a suck-it-and-see approach—all that we have in relation to the service is the service specification. I refer members to our trunk roads discussions, during which the specification became critical in relation to service provision. The lesson that we learned there was that we want to be closely involved. We will be guided in that involvement by our reporters who, because of the evidence that they have taken so far, have a greater understanding of and access to networks than we do. Nonetheless, I argue that the closer we are to the service specification, the greater insight we will have and the more we will convince the Executive how seriously we consider the issue.
I wonder whether we are best placed to judge whether the draft service provision is appropriate, given that we are not experts.
We will get plenty of advice on that when the time comes. Interested organisations and our reporters will be there to advise us.
I support your view, convener. The draft service specification is critical and we should be involved.
It is a question of trying to bridge the points that were made by Robin Harper and John Scott. We are interested in the principles on which the draft service specification is constructed, rather than in its precise details. We do not want to get involved in deciding whether sailings to Islay should be at 7 o'clock, for example—that is not the level at which we need to be involved. We need to focus on the basis on which the draft service specification is set up.
I am happy that you raise that point specifically. I had taken it as read that we would want the reporters to continue the process. Perhaps I should have made that clear earlier. If there are any specific issues that the reporters need to bring back to us, such as permissions for going elsewhere and gathering evidence, they should come back to the committee as and when appropriate.
We have had a meeting with the consultants on the specification and we should continue our relationship with them.
Okay. That said, do we agree to all the recommendations and to the point that was made by Des McNulty?
Members indicated agreement.
I thank colleagues for their co-operation in what has been a useful meeting.
Meeting closed at 12:19.
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