Ferry Services (Gourock to Dunoon)
Members should move along and clear the chamber.
The final item of business is the members' business debate on a motion in the name of George Lyon, on the Gourock to Dunoon ferry services. The debate will be concluded without a question being put. Members who wish to contribute to the debate should press their request-to-speak buttons now.
Motion debated,
That the Parliament notes with concern the Executive proposal to restrict Gourock to Dunoon ferry services to passenger-only in the draft Invitation to Tender for Clyde and Hebrides ferry services currently operated by Caledonian MacBrayne; further notes that this proposal undermines action to upgrade Dunoon pier and transport links at Gourock pier; further notes the total opposition of the local community to this proposal, and considers that the Executive should find an alternative proposal that includes a vehicle-carrying ferry and satisfies European competition rules.
I begin by thanking those who supported the motion and put their signatures to it.
The Executive's proposal to restrict the ferry service between Gourock and Dunoon to a passenger-only service has gone down like a lead balloon in Dunoon and Gourock. It is not the first time that a Government has tried to shut down the service. The previous Tory Administration tried to do so twice, but was thwarted both times by a huge community effort and failed to carry out its threat.
I turn to what the proposal might mean for my constituents in Dunoon and for people in Gourock, who are Duncan McNeil's constituents. I am delighted that he is here to give the Gourock perspective. First, in relation to the people of Dunoon and the wider Cowal area, the proposal fundamentally removes choice and competition in the ferry route between Dunoon and the mainland. It creates a private monopoly on the route. Most of the community and I believe that the private operator will be unable to cope with the extra demand as a result of the withdrawal of Caledonian MacBrayne Ltd's service on the Gourock to Dunoon route. The proposal comes at a time when the new Loch Lomond and the Trossachs national park has just come into being. The Gourock to Dunoon route is one of the two entrances to the park, so we are expecting a rise in demand for that service.
We also believe that the proposal will lead inevitably to higher fares on the route. At the moment there is real competition. We can contrast the service level and price structure of the route with that of the Rothesay to Wemyss Bay service. The distances that the services cover are virtually identical, the crews are identical and identical ships operate on the two routes, but the Rothesay to Wemyss Bay service is approximately twice the price of the Gourock to Dunoon service. It is impossible for businesses to negotiate private arrangements with operators on the Wemyss Bay route. However, most operators, regardless of whether they are tourist operators, manage to negotiate good rates as a result of the competition on the Gourock to Dunoon route.
We believe that fares will inevitably rise on the route, but that situation is in stark contrast to that which faces the other 25 communities that are affected by the tendering process. It is quite right that the Executive has guaranteed them a cap on fare increases over the five years of the contracts, but Dunoon is the only community that will not be given a guarantee on future fare levels as a result of the proposals in the contract.
We believe that the proposals will mean poorer service and higher fares. Many businesses in Dunoon believe that the proposals could cause a severe economic downturn in the area. It is certain that the proposals will hurt individual businesses because of the likely rise in fares—there is no argument about that.
Deloitte & Touche—the Executive's consultants—looked into the options for the route and concluded that a passenger-only option was the most expensive for the public purse and that the option was
"not considered feasible in the long-term"
The impact on the town of Gourock will also be substantial. The 110,000 cars, 7,877 commercial vehicles and 1,154 extra coaches that will be carried by Caledonian MacBrayne will all be diverted through Gourock town centre, which has—to say the least—very high levels of traffic congestion. That congestion will increase as a result of the diversion of all vehicle traffic from the CalMac service to the Western Ferries (Clyde) Ltd service. The proposal could also bring into question further progress in the development of the transport interchange in Gourock. I am quite sure that Duncan McNeil will raise that issue.
Gourock is the sheltered port for the Arran and Rothesay services. In bad weather, all boats in the Clyde are diverted to Gourock, which is the only port where they can tie up in extreme weather, particularly if a sou-wester is blowing. Last year, 35 diversions from the Rothesay service went to Gourock. What will happen to the link spans if the service is shut down? Who will pay for the link spans under the new contract? Will they still be available to meet that demand when the wind blows and the weather is extremely bad?
More than 6,000 people—over 60 per cent of the local population—have signed our petition against the Executive's decision, which demonstrates the depth of local concern.
What is the way forward? The local community accepts that the Executive must follow European rules on the matter—we do not dispute that. However, local people will not accept the lack of consistency in the approach that has been taken to the situation in Dunoon, in comparison with that which has been taken to the position of our friends in Orkney and Shetland. The contract for Orkney and Shetland came into existence only recently—members may have seen in the news only last week the announcement that a new ferry operator is taking over that contract. There is a subsidy for cars and passengers but not for freight and, despite the fact that there are two unsubsidised freight carriers in competition on those routes, the subsidised operator is not being prevented from carrying freight to meet European state aid rules. To me, that shows a lack of consistency in our approach to meeting our obligations under European state aid rules and the cabotage regulations. My constituents believe that that is unacceptable. If the Executive is to be consistent, it must surely mirror the approach that it took to the Orkney, Shetland and Aberdeen route in the Dunoon to Gourock route. That means a passenger-only subsidy that would leave the operator free to carry vehicles on a commercial basis.
Were those state services in situ when the contract was put out to tender?
I understand that those services have been in operation for a number of years. On a number of occasions my colleague Mr Wallace wrote on behalf of the private operators claiming subsidy leakage from the subsidised operator on the route. The Scottish Office told him that the subsidy was ring fenced, that there was no leakage whatever and that there was therefore no case to answer. The Executive has consistently adopted that Scottish Office approach to the payment of subsidies on that route.
My constituents are in favour of a passenger-only subsidy; one can only argue genuinely that there should be a passenger-only subsidy. However, they object strongly to the proposed restriction of services to carrying only passengers, which would mean that the operator would not be allowed to carry vehicles on a commercial basis—the current operator takes vehicles on a commercial basis. There is no reason why that argument cannot be won in Europe. Some of the Executive's proposals in relation to ScotRail allow for the use of a mechanism whereby subsidy can be ring fenced to deliver certain goods. I see no reason why such a mechanism cannot be used for the Gourock to Dunoon route.
The European state aid rules were introduced in 1993, when the United Kingdom Government held the presidency of the European Union. John MacGregor, the then Secretary of State for Transport, drove through the state aid rules and the cabotage regulations. It is clear that he was unaware of how that might affect the Caledonian MacBrayne position. He must have been unaware that we had subsidised services in Scotland.
For the past 10 years, CalMac has been operating on the route with a passenger-only subsidy from the Executive and, before that, from the Scottish Office. CalMac has been free to carry vehicles on a commercial basis. The Minister for Enterprise, Transport and Lifelong Learning has confirmed that situation in written answers on a number of occasions. If Europe claims that the present operation represents an illegal proposition, why has the European Commission not challenged it in the past 10 years?
I have had discussions about the situation with the Deputy Minister for Enterprise, Transport and Lifelong Learning. I ask the minister to restate the pledges that he gave to Alan Reid and me. We had a good discussion on the matter. I acknowledge that the minister is aware of the concerns. I ask him to confirm that he has an open mind on the matter, to examine the alternative proposals that all the other community representatives and I have suggested and to press those proposals with the European authorities. Finally, I ask him to ensure that his officials work closely with the local community for the duration of the process.
We move to open debate. We can have speeches of four minutes, plus time for interventions.
I thank George Lyon for giving us the opportunity to debate the issue, but I regret that I cannot support his motion. I cannot accept that transport links, in the shape of the transport interchange and the extensive redevelopment of the area around Gourock pier, which has received substantial Executive support, should be at risk. I seek assurance from the minister on that point.
I share the concerns of George Lyon and others about the Gourock to Dunoon ferry service. Like George Lyon, I have a strong constituency interest in the matter and have had regular meetings with, and briefings from, ministers for some time. Lewis Macdonald has been left in no doubt about my disappointment with the content and timing of the announcement to reduce the passenger service.
It would be churlish not to welcome the continuation of the subsidy for the passenger service, but that is seen as a bit of a hollow victory and as one of those odd EU decisions, because a reduced service will be delivered for an increased subsidy. That is the sort of decision that brings the EU into disrepute.
I share George Lyon's concerns about the restriction of the route to passenger-only services. Inverclyde needs effective, attractive and efficient transport links. I fear that reduction to a passenger-only service will cause a breakdown in the use of ferry services. The Gourock to Dunoon route that links the centres of the towns connects with the existing rail service at Gourock and forms a direct link to the west of Scotland, Glasgow airport and the rest of the world.
As well as being a significant link between the two communities, the route is important for the local economies. The economic strategy of Inverclyde Council is to promote the area as a place of opportunity for substantial economic growth. It is keen to attract businesses, families and tourists. I understand that Argyll and Bute Council has similar initiatives. Therefore, it is important that the Executive makes clear its commitment to the future of the service over the longer term.
I also have some local concerns. The present facilities at Gourock include the CalMac headquarters, which provides the area with a wide range of highly valued, quality jobs. We do not wish those jobs to be put at risk.
George Lyon mentioned traffic congestion, which is already a problem for Gourock residents, with 110,000 cars and 9,000 heavy goods vehicles and coaches using its narrow roads. I concede that that existing problem will continue to be a problem irrespective of the decision that is taken. The problem is growing and must be acknowledged by Western Ferries at McInroy's Point.
Proposals for services for foot passengers only raise serious concerns among my constituents. I hope that the minister does not have a closed mind on that matter and that he will treat my constituents' concerns seriously and consider all the proposals in order to ensure the future of this important service.
I find myself in the unique and pleasant position of agreeing with absolutely everything that George Lyon said and I thank him for securing the debate. I want to augment some of the things that he said and to suggest to the minister three reasons for thinking again on the matter. He must prove that the consultation process is real.
First, there is the absolute certainty of the creation of divisive local opposition and the probability of a legal challenge, should things go that far. Members who represent Dunoon or Gourock will be aware of the work that has been done and I want to pay particular tribute to the pier pressure group, the Dunoon and Cowal marketing group and the Cowal ferry users group. Those people have been good at keeping their eye on the ball and at focusing on what they can achieve. There is no unrealistic expectation and there is no desire to put Western Ferries out of business, but there is a desire to allow a private company to compete on a fair basis and only on a fair basis. Those people deserve credit for that.
We have to bear in mind the fact that, if the proposals go ahead, the creation of the private monopoly would lead almost inevitably to a challenge by the Office of Fair Trading—a challenge that is in the offing. That would also almost inevitably lead to a complaint to the European Commission, which could be made on many grounds. I will tell members a few: inefficient use of public subsidy; the fact that the Scottish Executive's own report from Deloitte & Touche in 2000 highlighted that the public service obligation subsidy would have to be four or five times higher if the effect of having vehicles on the same route was removed; the fact that the proposals are anti-competitive; the fact that a public subsidy would be creating a private monopoly; and the fact that, since 1981—I think—there has been a frequency restriction on the public company, which again is evidence of an anti-competitive situation. The fact that the vesco, the vessel-owning company that will be created, would be providing a vessel that was suitable only for foot passengers and not for vehicles could be taken as evidence of the creation of a barrier to fair competition. In other words, unless the minister reconsiders, I fear the certainty of further challenge.
Secondly, the principal point that the minister has made throughout this process has been that we cannot have cross-subsidy because Europe will not allow it. That is an especially weak argument. Nobody is suggesting that there should be cross-subsidy. Professor Neil Kay of the University of Strathclyde has been instrumental in putting a different view. His submission makes the point that accounting procedures are already in place in different Government departments—the Department of Trade and Industry, the Office of Fair Trading and the Office of the Rail Regulator. Why can those procedures not work here? Using the benchmark figures from the 2000 report that it commissioned, the Executive could set up a capping system that would guarantee that there would be no cross-subsidy. That transparency could then be taken back to Europe when the Executive argues its case, using its own figures. In other words, there is a way. It is not enough to say that we cannot go anywhere near cross-subsidy.
Thirdly, I do not know whether the minister has had a chance to read the submission from Professor Sir Neil MacCormick MEP, who mentions the continuing dispute over the respective benefits to the public purse of a passenger-only service or a passenger and vehicle service, and then asks a simple question. Why not run a dual tender for that route, asking those who seek to win the tender to put in the level of subsidy both for the passenger service on its own and for the passenger and vehicle service? The advantage of that is that it would answer the question once and for all. We would no longer have to test the market on various models, but we could find out from the market exactly what the route is worth and what the benefit or loss to the public purse would be.
If the consultation process is to mean anything, the minister must listen to the total cross-party opposition to the proposals. He must understand that to go down the proposed route is to alienate and divide a community. He should not try to blame that on the European Union, because the European Union has made a decision based on information that was given to it by the Executive. He should reopen the matter; he should revisit it and then ask for a different interpretation.
I am glad that George Lyon has secured this debate on a subject that is vital to the people of Dunoon and of the Cowal peninsula. The importance of maintaining the CalMac vehicle service from Gourock to Dunoon cannot be stressed strongly enough. I ask the minister to listen to the people of Dunoon and to take action to ensure that their lives are not disrupted and diminished by the withdrawal of the service.
A similar situation arose in 1982, and it was an intervention by the then MP for Argyll and Bute, the late John MacKay, who brought the matter to the attention of Malcolm Rifkind and George Younger, the Secretary of State for Scotland, that resulted in the vehicle service being maintained. That Conservative Government listened to the people of Dunoon, and I hope that the current Lib-Lab coalition will follow that example.
The main problem seems to lie in the evidence that was given to the European Commission by the Scottish Executive and on which the Commission has based its responses. The foot-passenger service is subsidised, but not so the vehicle service. However, the Executive seems incapable of identifying a way of showing that there is no subsidy leakage from foot passengers to vehicles. That is the key issue and the one in which changes must be made to ensure the security of the service for the people who want it and need it—the people of Dunoon and Cowal and the tourists who want to visit Scotland's new national park and other parts of the west Highlands. What on earth is the point of the Executive trying to publicise Dunoon as a gateway when it seems to be intent on closing the main gate?
Since news broke of the possible withdrawal of the vehicle service, there has been public uproar and indignation in Dunoon. I hope that the minister is aware of that public resentment. I have been involved in the hard fight to resurrect the historic Dunoon pier and would like there to be a roll-on, roll-off service for vehicles and passengers using the Gourock to Dunoon route. The Deloitte & Touche report points out that carrying vehicles would reduce considerably the necessary subsidy compared with a passenger-only service. Why then is the Executive so intent on creating an unpopular passenger-only service, which would be more of a drain on the public purse than a popular RORO service would be? It certainly does not make any sense to the people of Dunoon.
The Scottish Executive has failed to provide the Commission with any excuse to agree to the continuation of the CalMac vehicle service. I do not believe that the Commission wants to inconvenience the people of Dunoon with long ferry queues. It has been forced into the current position by the Scottish Executive's wrongful portrayal of the facts of the case. The Scottish Executive, not the Commission, has produced the mess, and the Executive must now extricate itself and the ferry users from that mess. That is perfectly possible, but the Executive must establish an accounting system that shows the costs and revenues of an extra vehicle service separate from the costs and revenues of the basic subsidised foot-passenger service. That would satisfy the Commission. The Scottish Executive has asked the Strategic Rail Authority to do something similar. If it can be done for rail services, why not for ferries? Bidders for the CalMac networks could be instructed by the Executive to use accounting methods that prevent subsidy leakage. The Executive could ask the SRA or the OFT how to do that, and they would tell it.
As a PSO is necessary for the Gourock to Dunoon route, it is surely the Executive's duty to consider the best option of delivering a PSO, bearing in mind the needs of passengers and the cost to the public purse. It is obvious to most people that the best option is a RORO service between Gourock and Dunoon that subsidises passengers only. That would please the people of Dunoon. Along with Western Ferries, it would make Dunoon a gateway to the Highlands and it would satisfy the European Commission.
The Rural Development Committee has just completed a report on the barriers to integrated rural development, which highlights transport infrastructure as a key barrier. Ferries were mentioned again and again in evidence. Membership of the EU is meant to help our citizens rather than disadvantage them. I urge the minister to work on a different decision for the ferries to Dunoon that will prove advantageous to local people and tourists alike and will help Dunoon to prosper.
I thank George Lyon for giving us the opportunity to debate the important issue of the Gourock to Dunoon crossing, in which I have an interest as an MSP for the Highlands and Islands and as one of two reporters on the CalMac tendering process to the Transport and the Environment Committee. The other reporter is Des McNulty, who has apologised for being unable to be here—he has an engagement in his constituency.
Des McNulty and I have followed the process for well over a year. Our interim report in September 2001 concentrated on the justification for tendering and the implications of the decision. Our second report, which was presented to and unanimously accepted by the Transport and the Environment Committee this week, deals with the draft service specification.
Sometimes together and sometimes separately, Des McNulty and I spent about two weeks in western Scotland and the islands gathering people's opinions on the draft proposals—of course, that included visits to Argyll and the Clyde. I have spoken privately and at public meetings to councillors, community groups, hauliers, trade union and local authority officials and individuals, so I have a clear idea of the strength of feeling over the proposed loss of the vehicle ferry service from Gourock to Dunoon and anxieties over the future of Dunoon pier and the prosperity of the town. The same is true in respect of Gourock.
Some of the strength of feeling was caused by shock at the proposal, which was not expected. Indeed, only three or four months previously, CalMac said that the vehicle service was not at risk as far as it was concerned. Of course, CalMac was not in a position to know what was happening in the negotiations between the Commission and the Executive, but its reassurances engendered a false sense of security. I am sorry that the Executive was not more forthcoming at that point about its negotiations with the Commission. I appreciate that the lack of transparency was at the Commission's insistence, but the Commission should be made aware that we think that the process was undemocratic and unacceptable and that the people in Cowal deserve better.
I know that a great deal of effort was put into winning agreement from the Commission for PSOs for mainland to mainland routes and that the then minister with responsibility for transport stated clearly that the PSO across the Clyde—Gourock to Dunoon—was for passenger service only. I do not think that local people appreciated the implications of that and that is the fault of the consultation process.
The member must understand that Sarah Boyack came to Dunoon at my request when the issue emerged. It was clear from conversations with her, as the minister with responsibility for transport, that she intended to argue for a subsidy for passengers, but no restriction on the kind of service to be provided—that is, the status quo. In the period between then and the sudden body blow of an announcement on the day before we broke up in June, no one—including me, the local community, Duncan Hamilton and the other MSPs—had an inkling that suddenly, in November, as Iain Gray stated in his letter to The Herald, the Executive had been informed that Europe's requirements would be to restrict the service to a passenger-only service. Perhaps Maureen Macmillan knew.
That is why there has been great anger in the community. I hope that the member accepts that view. We were always led to believe that the status quo would exist and that there would be a passenger-only subsidy, but no restriction.
Yes.
The earlier consultation process was flawed, in that the consultants did not seek the views of people at the grass roots. I pointed that out to the consultants at the time and circulated my views to all community councils to try to alert them to the consultation. It is of the utmost importance that people are fully informed of issues that will affect them. From public meetings that I held and press reports in particular, it was obvious that there was an ignorance of the process and total shock at the outcome.
Unfortunately, it seems that European competition rules must be obeyed, even if they throw up ridiculous anomalies such as the fact that obeying them could result in the necessity of a larger subsidy or could result in a private monopoly where previously a public service competed with a private service.
Maureen Macmillan is right to say that, to a certain extent, European regulations must be obeyed, but the issue relates to the interpretation of the regulations. Does she accept that the Executive should go back with more robust information, which it has had since 2000, and the Deloitte & Touche report, and argue the case for the maintenance of competition?
Maureen Macmillan has one minute.
I know that the Executive has gone back and forward continually with the issue. Duncan Hamilton misleads us when he says that the Executive could have done something else and that it did not give information. That is his interpretation; it is not mine.
I said that European competition rules must be obeyed, but I feel that the draft proposals should not be the last word on the Gourock to Dunoon service. The Transport and the Environment Committee's report said that the EC's rules were too inflexible and should be challenged on their rigidity, which acts against the public interest that they are supposed to protect.
I ask the Executive to continue discussions with Europe and to point out the anomalies, while considering other options. Would the Gourock to Dunoon route be viable if the passenger service were removed from the bundle and put out to tender alongside the vehicle service, with total transparency over where subsidy would apply? If the combined passenger and vehicle route were market tested and seemed profitable, would the Executive consider putting the route out to tender out of undertaking?
The Executive may have to do that with other routes and subsequent bidding rounds, so it cannot set its face against such options. However, I am pleased that the deputy minister has said several times forcefully—the last time was when he gave evidence to the Transport and the Environment Committee—that the proposals are in draft form and that he is open to suggestions from any quarter of an alternative solution that is more acceptable to the people of Gourock and Dunoon and which satisfies Commission rules. I hope that the minister can show that he has sought such a solution. I look forward to his response to the debate and to the committee's report.
I have listened with great interest to the speeches and I thank George Lyon for the opportunity to debate this important issue. The matter is of great concern to communities on both sides of the Clyde and I was glad of the opportunity to meet community representatives in Dunoon at the end of August. A consultation process is being undertaken, which is why I met them and met various elected members, local authorities and the Clyde shipping services advisory committee. As Maureen Macmillan said, I also gave evidence to the Transport and the Environment Committee a few weeks ago.
The context of our proposals is the need to bring subsidised west coast ferry services into line with European law, by inviting tenders under public service obligations, known as PSOs. In April 2000, "Delivering Lifeline Ferry Services" sought views on options for putting our lifeline ferry services out to tender to comply with European rules. Following that consultation, we sought European approval for tendering the network as a single bundle. That approach was designed to maximise service reliability, simplify vessel management and prevent cherry picking of the potentially most profitable routes. Most respondents to the consultation exercise supported that approach.
We were also keen to overcome the presumption in European rules against subsidies for mainland to mainland routes such as the Gourock to Dunoon route and the Tarbert to Portavadie route—particularly on the Gourock to Dunoon route, which is in direct competition with a private sector operator that provides an unsubsidised service. We worked hard to show that the unique circumstances of Scotland's west coast justify a single-bundle approach, PSOs on mainland to mainland routes and a continuing subsidised service between Gourock and Dunoon. We have made important progress in discussing those matters with the Commission.
During all those negotiations, did any Commission officials, who seem to have quite a power of decision over the matter, visit the area?
The discussions were conducted in Brussels, as is the way of these things. I am sure that Dr Ewing is more than familiar with how the European Commission operates.
We concluded from those discussions that the network can be tendered as a single bundle; that mainland to mainland routes can be justified; and that a subsidised passenger service between Cowal and Inverclyde can be continued, as it provides a direct connection for foot passengers between the bus station at Dunoon and the railhead at Gourock, which the private sector operator's out-of-town vehicle service does not. However, following those discussions, we concluded that the existing combined passenger and vehicle service on the Gourock to Dunoon route would not comply with EC rules, as it would breach competition law by providing an unfair advantage to the successful tenderer in attracting vehicle custom between Cowal and Inverclyde.
Will the minister give way?
I will give way in a moment.
That decision was not reached lightly. We continue to talk to the Commission about possible interpretations of the European rules, enforcement of which is the Commission's responsibility, but our view is that the proposal that we have published for a continuing passenger-only subsidy on a passenger-only vessel is the best way to secure the future of a subsidised service between Gourock and Dunoon.
The minister says that he made representations. Will he publish the documentation that relates to the representations that he made? Given the nod-nod, wink-wink, "Don't worry, it'll be a passenger-only subsidy" assurance, surely there is nothing to stop a vehicle service in addition to the passenger service. Did the Executive at any point use different, transparent accounting procedures to get round the problem of cross-subsidy leakage, which is the basis on which the Commission rejected the Executive's proposals?
The discussions with Europe have been held informally. That is the usual way in which such advance discussions with the Commission are held. That is why we will not publish the documentation.
The minister has stated categorically that the interpretation was the Executive's and not Europe's. The point that we are making is that the minister should consider other approaches. He should go back to Europe and argue the case again. We believe that other approaches exist. In the debate, we have demonstrated that a number of good ideas could be taken back to the Commission. We should stop trying to blame Europe—the interpretation is the Executive's.
As I said a moment ago, we continue to discuss the matter with Europe. Although the Executive will take the decision, it would be completely remiss of the Executive to take our decision without considering the discussions that we have held with the European Commission. The consequences of making the wrong judgment on the matter are not trivial. We could jeopardise any future Gourock to Dunoon service. We might also close the door on other mainland to mainland routes and put at risk the whole strategy of tendering the network as a single bundle.
I do not know where Duncan Hamilton got his nod-nod, wink-wink idea. In response to George Lyon's point, I said that it is firmly the case that when Sarah Boyack went to Dunoon on behalf of the Executive, she made it clear that the Executive would continue to work to achieve a combined passenger and vehicle service. No guarantee was given at that time, nor could one have been given.
As a number of members have mentioned, the key difficulty is finding a way to ring fence robustly the subsidy for the passenger-only service. The simple fact is that to allow a vehicle service to operate on the same vessel as a subsidised passenger service would mean subsidising one operator to run against an unsubsidised private competitor. Any subsidy that is received in respect of passengers cannot fail to contribute to the common overheads of a vessel that carries passengers and vehicles. That is the fundamental problem with a dual tendering approach. As I said, we will continue to explore with the Commission whether we can identify a way of ring fencing that would demonstrate that subsidy for passengers does not reduce the cost of carrying vehicles.
It has been pointed out that the roll-on, roll-off service would be cheaper than the passenger-only service. If that is the case, how are the vehicles subsidised by the passengers?
Those points arose from the Deloitte & Touche report. The final conclusion was that it was difficult to justify any subsidy on the route. If we could find a mechanism for ring fencing the subsidy, we could consider whether to seek to implement that on a single route within a larger bundle or, as at least two members have mentioned, whether to explore the option of a separate PSO for the Gourock to Dunoon service. In that case, there would be no certainty that the successful bidder for the service would be the same as for the rest of the network.
It is worth noting that we could undertake a separate tender for passenger subsidy of a combined passenger and vehicle service only if we first found a way to ring fence the subsidy. As with the single-bundle approach, that is the first requirement. If what we propose does not conform with European regulations, a separate PSO will be no more likely to be acceptable than the route being part of a single bundle.
One further option, which has been mentioned in the debate, is to place no PSO on the Gourock to Dunoon service. That would allow an operator to provide a combined service at their own commercial risk. CalMac operates the current vehicle service as an out-of-undertaking service. If there is no PSO, there is no obligation on any company to provide a commercial service. The consequence of taking the Gourock to Dunoon service out of the undertaking altogether might result in no service of any kind. Given the real benefits that we believe can continue to be delivered by a passenger service between the two town centres, it would take a lot to persuade us that the no-PSO option was worth the risk.
We are mindful of the consequences on both sides of the Clyde if the result is the end of the present combined service. As far as Dunoon is concerned, a public transport fund award was made last year for construction of a breakwater, and preparatory work on that is under way. It is up to the council to consider whether it should put forward a case for a new linkspan and other shoreside works. As a private sector operator might, indeed, wish to operate a vehicle service from Dunoon pier, there may well be a case for those works. If that case is made, we will consider any funding options, whatever the status of the PSO service.
In response to Duncan McNeil's points about Gourock, responsibility for Gourock pier, as with other CalMac piers, will fall to the vesco. There is no reason why Gourock's current use as a safe refuge for vessels should not continue for as long as it is required. The vesco would be responsible for maintaining the pier, although it might delegate that responsibility through the management contract.
I should also point out that decisions on the ferry service will not impact directly on the Gourock interchange project. We share concerns about the delay to the project and are exploring with Network Rail, Inverclyde Council and others ways of moving the matter forward. We will also discuss concerns about traffic problems in Gourock with the local authority should such infrastructure problems arise.
One of the protections for the headquarters facility at Gourock is the application of the Transfer of Undertakings (Protection of Employment) Regulations, which are built into the entire tendering process and impact on the work and conditions of the people who are employed there. In any case, we see no reason why the headquarters would move.
We have made significant progress since we concluded that our ferry services required to be tendered to comply with EC rules. I recognise that we have not made the progress that we sought to make on the combined passenger and vehicle service between Gourock and Dunoon. The strong response to our consultation paper reflects concern about that issue. The responses have been helpful to us and we will consider their content carefully, in particular to find out whether they contain any suggestions that would enable a combined service to fulfil the terms of the proposed passenger PSO and meet EC rules. If so, I will explore those suggestions further with the Commission, which is aware of local feeling. My officials and I have a continuing dialogue with the Commission on the issue, and we will consider the options carefully.
We will wish to announce the decision on the final service specification as soon as possible to allow us to proceed with tendering the whole network. At the heart of our decisions will be a determination to protect fares and services as far as we can. We recognise that to do that, we must make proposals that comply with European law, and I hope that any such proposals will have the Parliament's support.
Meeting closed at 17:53.