Official Report 197KB pdf
I call the meeting to order. Agenda item 1 is on the tendering of the Clyde and Hebrides ferry services, for which I welcome Dr Jeanette Findlay of the University of Glasgow's department of economics. She has conducted work and published papers on the issue.
The first comment that I should make is that, although I am a senior lecturer in economics, I did not complete a PhD, so I am not a doctor.
I apologise for giving you an additional qualification. I am sure that you will acquire it one day.
It is a training degree and I have already been trained.
Good afternoon, Miss Findlay—I gather that you are not Dr Findlay.
You may call me Jeanette, if you like.
In the introduction to your paper, the last sentence in the last paragraph on page 2 says that the
The sentence that precedes the one that you quoted says:
You seem to be fairly firm about the possibility. I am no lawyer, although a lawyer is sitting next to me. I wanted clarity to put other comments in perspective.
My paper says—although I cannot find the reference immediately—that some of the figures came from industry insiders. The paper is not of the type that I would produce in an academic setting. The STUC asked me to produce the paper, and that is the information that I was given. The figures that I use in my paper seem reasonable—for example, I was given the £20 million figure by someone inside the company. In the paper, I explain why it is likely that the figure will be high. CalMac has a good redundancy scheme, which gives four weeks' wages for every year of service. Because of the nature of the company and the areas from which it draws its staff, it has a low staff turnover and people have built up long records of service, so redundancy payments are likely to be high.
I will pursue your point about terms and conditions. From an academic perspective, if a new company or whatever comes along at the end of the process, proceeds to modernise terms and conditions—they would not necessarily be as generous as the present terms and conditions but they would be reasonable in the marketplace at large—how long would it take for the new system to generate a payback that would cover the £20 million?
Sorry, are you saying that if—
If modernised contracts were in place—I am thinking particularly of the packages—
It is not a question of contracts. The sum relates to redundancy payments. If there are to be redundancies, those entitlements will already have been accumulated. You are asking me how long the savings associated with those redundancies would have to be in place before—
If the payments were made—
Redundancy payments, yes.
If payments were made and people were re-employed with more modern employment values—or whatever we want to call them—as seen in the marketplace at large, how long would it take to redeem that amount of payout?
That is not my understanding of what would happen. A company cannot make people redundant and re-employ them if the Transfer of Undertakings (Protection of Employment) Regulations apply. It cannot make people redundant if the jobs are there, so they would not be re-employed on lesser contracts. There would just be fewer staff.
But if they are made redundant and a new company comes into being, what is to prevent that company from employing them?
If TUPE applies, the new company could not do that. It would have to employ them on the same terms and conditions.
Okay. Thank you for that.
The Executive has indicated that it is likely that TUPE will apply, so it is unlikely that the £20 million redundancy costs will be incurred. Did you get any indication from industry sources of what redundancies might be possible if a new company sought to make reductions in costs? Assuming that TUPE applies and that all the staff become employees of the new organisation on day one, how might a new company try to reduce the total workforce? As I understand it, the company has about 1,000 employees at present.
Sorry—I think that I misunderstood the question. You are asking me about a situation in which TUPE applies and a new company wins the contract, but what was the next part of the question?
It seems unlikely that all 1,000 CalMac employees would be made redundant. It is likely that TUPE will apply and the new organisation will need to operate all the services, but are there fears within CalMac that employees in certain sections of the company are vulnerable to being made redundant?
I apologise—I misunderstood the question. The company is severely restricted by the maritime safety regulations in the extent to which it can reduce staffing. That might prevent redundancies in many of the areas in which a new company might want to cut staff to make the savings that might be required. It might also find itself subject to a legal challenge. Again, I am not a lawyer, but there is a legal precedent, in cases in which redundancies are made for efficiency reasons, for staff to reject the new terms, force their employers to dismiss with notice and sue for unfair dismissal. That happened in a case that involved North Lanarkshire Council.
Your paper helpfully breaks down the general issue of tendering into its various components, which allows us to focus our minds. I want to focus on the summary of costs, on page 16. In the first line of the table you indicate that the cost of tendering every five or six years is "unknown". Are you making the point that it is obvious that the process of tendering would involve a cost?
Yes. Costs have been incurred in relation to the current situation and we have an indication of what those costs are. It is clear that if tendering is to take place every five or six years the same amount of effort will have to go into the process every time, to ensure that the tender is tight and that everything is properly regulated.
The final line of the table indicates that the tendering costs of the first bid, if the process were to go ahead, would be approximately £2 million. I think that you pointed out that that figure does not include an estimate of the cost of civil servant or management time.
The estimate simply reflects the costs that were indicated by—
They were indicated by Nicol Stephen, in a parliamentary answer to a question that I asked.
Yes.
The second line in the table shows a large tax liability from cessation of trading, which you estimate at between £5 million and £10 million, whether the operations company—opsco—or a third party wins the tender. Will you briefly explain why that loss would be incurred if—and only if—tendering were to go ahead?
The tax liability would be incurred at the point at which the company was split. CalMac is entitled to certain tax allowances as a result of its capital expenditure, but if the company were split, opsco would not incur capital expenditure to the extent that vesco—the vessel-leasing company—would do.
Is that because of the public law of tax?
Opsco would not incur capital expenditure to the same degree as vesco would, because it would not own vessels.
I presume that the Chancellor of the Exchequer could amend tax law if he wanted to, although that is not a matter for us.
Again, the figure on the tax liability came from someone inside the company.
If the estimate came from someone inside the company, why does it vary between £5 million and £10 million? Why could not your mole provide a more precise figure?
I think that they could not do so because of the difficulty of assessing liability. I imagine that tax law is complex. The person is very senior, but he could not give me a more exact figure.
Whoever your information emanated from, I remember accountants and tax advisers being vague. However, the figures are very high.
I make no claims for the figures other than to repeat that I was told that a tax liability would arise from the division of the company, whether or not CalMac won the bid. Those are the figures that someone inside the company gave me. I presume that the committee could question the company on the matter.
I think that the company indicated that it is not in a position to be able to respond to evidence, because of the tendering process—if I have got that wrong, no doubt we can deal with the matter at another time. I think that that is why the company cannot give evidence to the committee, which is an understandable position.
Yes. The cost would arise from the splitting of the company and the cessation of trading by CalMac. Under that scenario, CalMac would cease to exist.
According to the table, there will be no pension costs if opsco wins. That is because CalMac will continue to operate. However, if the tender goes ahead and another company wins, you suggest that the cost could be a
You will see from the section in the paper on pensions that CalMac's own scheme had a deficit of more than £6 million at the end of the financial year 2003-04. That figure is thought to be around £8 million now. If CalMac continues to exist as CalMac, and if the scheme remains in place, CalMac has plans—described in its annual report—for contribution rates that would
The last sentence on pensions on page 11 says:
Pension rights do not transfer under TUPE even if TUPE applies, so I do not think that such companies would have any liability for the existing pension scheme. However, under the tender document, they have a duty to provide an equivalent pension scheme for any staff that they take on. The bid would have to include the cost of a pension scheme that is as generous as the present one. That is my understanding.
That may be an issue that we could explore with the minister.
The companies would not have responsibility for the existing pension scheme, which would have to be taken care of elsewhere.
Would the pension scheme have to be split, with one part applying to existing retired beneficiaries?
The current pension scheme would cease; it would be closed down and no further contributions would be made to it. However, it would have to be managed to meet the liabilities.
A new pension scheme would have to be established to meet the requirements of the staff who were still employed.
Yes—of whoever was employed by the new company.
Have you finished, Fergus?
Not quite. I was meandering through the summary of costs table.
I will allow Bruce Crawford to come in at this point.
If the pension scheme is wound up and replaced by a new one when the new operator takes over, is there an expectation that the £8 million gap will be closed? If CalMac remains the operator, it will be able to do that. If not, will the Executive need to fill the gap?
The existing scheme will have to be managed by someone—either the Executive or someone appointed by it.
However, there will still be an £8 million gap.
Presumably, the gap will have to be filled more immediately than would be necessary if CalMac remained in existence.
I would like to pursue the issues that Fergus Ewing and Bruce Crawford have raised. I have a quick question for the witness.
Is it about pensions?
It relates to a comment that was made previously, but it is relevant because of the response that was given to Fergus Ewing's and Bruce Crawford's questions.
I will allow you in briefly.
Jeanette Findlay's comments on tax liability are contingent on splitting the company—in other words, the tax allowances go with the vessels. The same argument applies to the pension fund. Is it correct that, if CalMac continued as CalMac vesco, there would be no loss of tax allowances?
Are you talking about tax or pensions?
I am talking about tax. I think that the point also applies to pensions.
The tax liability would arise as a result of the division of the company, which would mean that CalMac ceased to exist and was replaced by two new companies. Even if opsco won the tender, the tax liability would remain.
If CalMac changed and became CalMac vesco, CalMac would not cease to exist and would be able to use the tax allowances. I speak as someone who has been a company director for most of his life. If CalMac continued on the basis that I have described, there would be a split in the pension fund. The part relating to staff associated with that aspect of the trade could roll forward, which would minimise the £8 million gap that has been discussed. We need to get advice on that point.
You have offered an opinion, rather than a statement of fact.
Is the member saying that, if opsco won the tender and continued to run the pension scheme, there would be no tax liability?
I am saying that if CalMac continued to own the vessels and, instead of dividing itself into two companies, remained one company but hived off part of its operations, it would get the tax benefit. In that situation, there would be variance in the amount of deficit in the pension fund. We need to get professional advice on that point.
You are drifting into a different area. Does Fergus Ewing have any further questions for Jeanette Findlay?
I want to go through the table, as it is a summary of the extremely helpful paper. It would be useful to us to get that summary on the record. We have got as far as pension costs. Jeanette Findlay already indicated that redundancy costs may be more than £20 million.
They are likely to be very large, given the generosity of the scheme and the very low turnover of staff. All the numbers were supplied by someone in the company. I have simply indicated why the sum is likely to be very large.
I appreciate that you are not claiming any expertise in quantification of the claim. You are setting out categories of possible cost.
Where I can, I have indicated where I have been given information. I am not arriving at the sums by any process that I could convey to the committee.
They appear to be broad-brush figures, although they come from sources that we would expect to be reliable.
I would not have quoted them to the people who commissioned the report if they had not been.
I am familiar with the situation. The figures that we have add up to a total of between £40 million and £42 million. They refer to costs that may arise but could be avoided if tendering did not go ahead.
That is right.
This is my final general point. If there is time after other members have asked their questions, I will come back to one or two technical points.
I agree. If I had had more time to produce a lengthier paper and to investigate those matters, I certainly would have done so. However, I say on page 14 that there are clearly problems with CalMac. No one is suggesting that CalMac is perfect. There are areas in which CalMac is falling short of expectations. I refer on page 14 to the Caledonian MacBrayne users committee, which might have something to say about these matters. In the period that I was given to produce the paper, I did not have time to investigate the matter in any detail, but my information, such as it is, is similar to yours. There is an issue about ticketing facilities and about head office costs, where some savings might be made.
Thank you very much. I did not mean to suggest that your paper was incomplete. You are right to point out that you have covered the point in your paper.
I am not sure whether I can go further. My point is based on the question that Fergus Ewing asked. Last week, we heard from Professor Kay about the public service obligations. You do not seem to mention them in your paper. Would you like to comment on that? Your paper appears to suggest that nothing can really be altered. We have already heard that the residents of some of the islands would like a more frequent service and would like various other changes to be made.
I am certainly not suggesting that nothing can be done. I am sorry to labour the point, but I had a very specific remit. Professor Kay has come at the matter from a slightly different angle, and Dr Bennett has come at it from a slightly different angle again. I agree with Professor Kay's proposals and with the type of things that he mentions; I also agree with Dr Bennett's paper. We have approached the matter in different ways. I have not covered issues that are covered in the other two papers because my remit did not give me enough time to do so.
Which of the various options for tendering might be more amenable to making improvements for local people? Perhaps I should contextualise that question by pointing out that, towards the end of your submission, you say that the activities in which CalMac is currently involved add value to the community. What incentive would there be for any other arrangement to provide the same services that CalMac provides at present?
If you are asking about the best way of improving services, I think that the Executive could write service improvements into the tender document and then ask bidders to bid on that basis. My point is that the ethos and culture of a publicly owned company or organisation are geared towards providing a public service. Whatever else they do, they are not pursuing profit. The main obligation of a new private company or new opsco—which, at that point, would be a private company—is to make a profit while meeting the tender specification at least cost. That is not a bad thing, but it will be very difficult to write a tender document that covers every one of CalMac's current activities, so a profit-maximising company would seek to reduce its activity and costs by targeting the services that are not specified in the document.
On page 7 of your paper, you say:
Not as far as I know.
On page 8 of your paper, you say that vesco
Yes.
I was just checking.
I think that Professor Kay also takes that view. In economics, there is what is called the moral hazard problem. In this case, the people who will maintain the fleet will have no incentive to do so—or, indeed, no interest in doing so—for beyond the period for which they are responsible for it. You would not necessarily look after a hired car as well as you look after your own car, because you have responsibility for it only for a fixed period. I think that analogy has been used before. A private operator of a fleet who has no guarantee that the contract will be renewed at the end of a fixed period will spend only the amount of money that is required to keep the fleet going for that period rather than worry about maximising the fleet's lifetime.
Surely it must be in the interests of vesco to ensure that the fleet is in good condition.
There should be monitoring of the fleet's condition, but that can be difficult and expensive and might cause tension in relation to the overall aim of cutting costs. Vesco will simply be a vessel-leasing company. The cost of the number of staff who would be needed to keep a close eye on how well a vessel was maintained over five years might be expensive. My concern is that vesco would be unable to monitor the condition of the fleet or would have to spend a great deal of money doing so.
I cannot quite see your logic. If there are no ships, there will be no vesco. Surely, therefore, vesco will have some interest in ensuring that the ships are maintained.
Some of what will happen is unknown and will become known only at the end of the first tender. The vesco's role will simply be to lease the ships and to ensure that they are suitable for the new company or the company that previously held the lease, if it wins the contract back. The lease will be for five years and at the end of that period, there will be a new tender. Whoever wins that tender will lease the ships again. In between times, vesco will, I presume, upgrade the ships or otherwise get them into the state that they need to be in. If the ships have not been well maintained in the five-year period, the costs of doing that will be much higher. There is something written into the document about maintenance but, again, that needs to be monitored. It is a condition of the contract that the company that leases the ships has no financial incentive to meet, except insofar as it is part of the contract. The company would do better to pay less.
Do you think that the cost of leasing the vessels from vesco should also involve an asset liability cost to the operator, which should be paying vesco for its upkeep of the vessels and to fund a future replacement programme? That would ensure recognition of the true cost transfer in the process, through the tender.
That would be one way of doing it. Not only am I not a lawyer, I am not an engineer, so I am unclear about whether failure to maintain vessels over five years can be rectified at the end of that time or whether that would minimise the vessels' life expectancy.
There must be historical information on depreciation costs and replacement costs that could be built into the tender. We know what Caledonian MacBrayne's costs were in terms of depreciation and replacement, so it should be possible to build that into the tender such that it would transfer the costs from vesco to the new operator.
I am sure that that could be done, but my point is simply that there is a conceptual issue about incentives.
I understand that—it is a good point.
My point is not dissimilar to Sylvia Jackson's. I cannot help thinking back to the discussion that we had about the trunk road maintenance contracts. We knew then that there were problems, but we have since discovered that the problem was not the private sector's wanting to get the contracts, but that the Scottish Executive, in drawing up the tendering contracts, did not make them specific enough and did not get the specifications right, which made it impossible for the existing operators to match the private sector bids. I am not sure what you know about the trunk road maintenance contracts, but is it true that the issue is not whether there is a tendering process, but how well defined the tendering contract is and what regulation takes place to ensure that the contract is operated appropriately?
That is part of the issue, but it is not the whole issue. Let us say that the tendering contract was written up perfectly, that everything that had to be done was done and that all the incentives were properly built in—that is not likely to happen, but let us argue that it has happened. In that case, there would still be issues in relation to a number of the additional costs, particularly the problem about the operator of last resort. At present, if a company won the tender and there was no longer an opsco that could take over, the whole structure of the industry and the system of incentives would change. The Scottish Executive would be in a completely different position in relation to its negotiations with the company that was operating the service, because there would be no other company that could take over the service. That problem will exist whether or not the tender document is written perfectly.
In relation to regulation, your paper states that the new operator, whoever that might be, would be
Regulation would have to be put in place, which is one of Professor Kay's proposals with which I tend to agree. My submission simply points out that the costs that would be associated with the increased regulation do not exist in the current circumstances.
But so long as they are—
The costs that are associated with the regulation of a private company that seeks to maximise profit do not exist to the same degree in regulation of a company that has a public sector ethos.
I understand that, but if the costs were built into the tender process, would that make the process fairer and more open and transparent?
It is imperative that, post tendering—if tendering takes place—a strict regulation regime be put in place.
If a private sector operator wanted to tender and it knew up front what the regulation and costs would be, would that have an impact on its ability to tender?
Yes.
I have a number of follow-up points. On Michael McMahon's point, the regulatory work that will necessarily fall to the Executive—such as monitoring to ensure that the process works and that we get the best from the tender—will incur costs. Would it be reasonable to argue that those costs should form part of the tender costs, so that the private sector contractor or the opsco paid them and everyone could see that? If that is not the case, the Executive will need to bear the new costs for the on-going tendering process, whereas it used simply to trust a public sector company to run the ferries efficiently and safely.
As far as I am aware, there is no sector in which regulated companies pay the cost of their being regulated.
I agree, although what you say does not make my suggestion unreasonable.
My paper points out that there is not an awful lot of room for manoeuvre outside perhaps the two specific areas of maintenance and staff. If the maintenance of the vessels was monitored ineffectively, such that the company could cut back on maintenance, there could be dangerous implications for safety and finances. However, if staff are covered by TUPE, as seems likely, there will be little room for manoeuvre.
My final question is about the costs that tendering will involve regardless of whether the opsco contract is won by CalMac or another company. Fergus Ewing suggested that your paper gives total costs of £42 million.
My report mentions tendering costs of £2 million.
I am trying to relate the tendering costs to the issue that David Davidson asked about earlier. The final sentence on page 2 of your report states:
When I wrote the document, nobody was absolutely sure whether tendering was necessary in order to comply with EU regulations. That is possibly unclear even now. Although I have done no work on the issue since I wrote the paper, I attended a seminar on it and, from discussions that I have had, my understanding is that tendering is not a legal obligation. Nevertheless, tendering may or may not be the best way to meet the obligation. When I wrote the paper, that question was unresolved; to a certain extent, it still is. There is nothing in the regulations to say that a tender must take place; however, many people appear to believe that tendering is the only way to comply with the regulations as they are written.
The perverse thing is that CalMac is going to be as obtuse as it can be in the meantime. The last thing it would want to do in this environment would be to allow anyone to understand how the company is being run, because that would give a competitor the chance to compete from a better position. It is daft, but we cannot get the transparency because of the tender situation.
That is the perverse situation that arises.
Fergus Ewing and Bruce Crawford have referred to the figure of £42 million. Let us be clear about that. The £42 million comes from a sum of all the figures in the table at the back of your paper, some of which are worst-case scenarios. I do not think that you are suggesting that there will be a cost of £42 million for going through the tendering process; I think that you have identified some risk areas. In particular, there is the one that we talked about earlier—the redundancy issue. The cost of redundancies would be unlikely to be £20 million unless the new tenderer got rid of the whole workforce. You are not saying that £42 million would be the cost of tendering.
Yes, that is correct. In a paper such as this, the eye is attracted to specific numbers that are given. However, my view is that some of the areas for which I am unable to estimate costs are where the real problems might arise. Issues such as the cost of regulation, the degradation of the vessels and the operator of last resort probably give rise to bigger problems. There are costs that I have not been able to put a number to but which should be taken into account.
We have got an awful lot of things into the open, but we have not got an awful lot of clarity. You say that it is all about the quality of the contract because, if the wording of a contract is not right, people do not know what they are bidding for. They will certainly not supply things that are not in the contract if they are not going to get any recompense for that, and that would be the case even if CalMac won the opsco contract. There are issues about taxpayers' money having been spent on subsidising the Mòd and other cultural activities, for which there is a separate minister with a separate budget. Why should such funding come out of the transport budget? It is a non-core service.
Can you get to the question please?
Yes. It prevents someone from coming out with alternative ways of delivering the service. Have the people to whom you have talked come up with any thoughts about how the tender could be varied to allow for modernisation and an improvement in service as well as a reduction in costs to make the service more efficient?
First of all, I did not say that the issue was all about the tender. I said that there is an issue about how a tender is written and how contracts are made. There is a lot of academic literature to suggest that that is where problems can arise. I have indicated that there may be other problems beyond that.
You brought up the issue of maintenance not being covered in a positive, proactive manner in the tendering process, so I assumed that you had looked more widely at the issue.
I looked at it from the viewpoint that vesco will only lease the vessels. However, the vessels will have to be maintained. A moral hazard arises from the fact that the people who will be maintaining the vessels over five-year periods will have no interest in them beyond those five years. For those who understand the engineering principles behind that, it is a serious matter. At the moment, CalMac refits are extensive and they maximise the life of the vessels. However, that might not be the case with the kind of refit that is undertaken by other companies—unless they are well monitored, and monitoring has a cost attached. I am simply identifying another cost.
The cost is presumably already being spent by CalMac in monitoring its own vessels.
A company does not have to monitor itself, does it? If it is the one doing the refits and that is part of what it does, there is no additional layer of monitoring. That situation does not exist now, but it would exist later.
Do you think that the vertical integration of CalMac covers that aspect?
Yes.
I have two points. First, the second part of the remit on page 2 of your paper, from which I did not quote earlier, says:
That is absolutely right. The big costs that are associated with running the services include staff costs. I have tried to address what might happen in different circumstances but, if TUPE applies, it seems that little can be done with such costs. Fuel costs are the same in any circumstances. Those are the big costs. If the tender document is written tightly enough to ensure reasonable maintenance, that will deal with a large part of the costs. The vessels that are specified must be used and they are designed to be route specific, so it is difficult to see how anybody can do much better.
I thank you for that and for pointing us towards the CalMac users committee's findings, whose criticisms we will probably need to identify.
Not as far as I know.
I thought that, notionally at least, the Secretary of State for Scotland—and now, I presume, the First Minister—was the operator of last resort, as with the railways.
That is what is written. I thought that you were asking whether another company is waiting in the wings somewhere—it is not.
No. That applies even when the First Minister is in Malawi, although he is known to be a versatile chap.
As well as being a chief in Malawi, the First Minister is a captain of CalMac.
There is no need to salute.
Yes, they could, but that company would have to be told that, at an hour's or a day's notice at most, at some point unspecified, they would be expected to provide a full ferry service on the Clyde and to the Hebrides. Although it would be possible to pay a retainer to a company to do that, there would be a danger in adopting that approach.
If anyone were to come from Barcelona to provide the service, you would not need to persuade me that an element of cost inflation might be involved.
No, I did not. I have no idea of the size of retainer that would need to be paid to a company in those circumstances. I do not address in my paper what would happen if a company were to be called on to take on the function of operator of last resort. I make the point now, however, that if the company that had taken on the retainer was expected to perform at 24 hours' notice, the situation would be precarious, especially as that company could be situated anywhere in the world.
Yes, but presumably—
I would be concerned about safety and other aspects.
If the situation arose through liquidation, surely the liquidator—or receiver, if that was the vehicle of insolvency—could be instructed on a temporary basis by the Executive to take over.
Yes, if the company had the staff in place who were ready to take over.
But, by definition, that would be a temporary arrangement.
I would have thought so, but, again, I am not sufficiently knowledgeable about the operation of the industry to know whether that would be the case. Let us say that the contract goes to tender and opsco does not win, but the company that wins goes bust. The situation will depend on who is employed and whether those people are available to be employed by the receiver. Let us say that the tender is won by a company that eventually replaces the staff with foreign seamen—those seamen would go home when the company went into receivership.
You may not be able to answer this question, which I should perhaps have put to Professor Kay last week. If that is the case, I apologise, but I put the question now. Do you envisage that the operator of last resort function will itself have to go out to tender?
I must confess that I had not thought about that.
Neither had I, but I think that Professor Kay mentioned it briefly last week. It is my fault for not pursuing it, but no doubt Professor Kay will read the Official Report of this meeting and we can come back to the matter. I think that he said that it might be necessary, because of EU procurement laws, for the operator of last resort function to go out to tender. That would be a further twist to the story.
It seems to me that we can consider the railway industry as a parallel. The operator of last resort at the point of railway privatisation was a residual British Railways Board—BRB (Residuary) Ltd—which was retained as a public sector body and can step in to operate a company that has financial problems or fails to meet its franchise requirements. In a recent case, that happened and BRB (Residuary) Ltd took over the operation of the franchise.
I have concerns about the use of another private company in those circumstances. Because of the nature of the services, it would have to step in at short notice and you might be right that it would have to go through another procedure.
In the analogy that I used, BRB (Residuary) Ltd retained, at the public's expense, a number of individuals who had experience of running railway companies. In that model, some key individuals would be—
That gives us another option, but the matter has to be examined seriously so that the provision is in place.
Whether the operator of last resort is an equivalent of BRB (Residuary) Ltd or is the vessel-owning company, is the matter as complicated as it seems? The service is delivered by the operatives—the guys on the quayside and the guys on the ships. They will exist regardless of whether the company goes down. Is it not the case that all that would be replaced is the management of the system at the higher level? Is the problem as big as people think? I struggle to see why it is such a huge issue.
If the people who sail the ships and the people on the quayside are still in place and it is simply a question of finding somebody else to manage them—to sort out the scheduling and do whatever else has to be done—that does not seem to be a big problem. However, we do not know where we will be in five to 10 years' time, after the first and second periods of tender. Who knows whether the staff will still be local people or whether they will have been replaced by foreign seamen, who might return home if the company goes bust? If the tender goes out and the winning company goes bust six months later with the same staff still in place, that is not a problem. If the company goes bust five or 10 years later, that could be a big problem.
So, in those circumstances, the issue is loyalty and ownership on the part of those who work for the company. I understand your point.
That completes our questions. I thank Jeanette Findlay for her evidence.
Meeting continued in private until 17:49.