Ferry Services (Orkney)
The next item of business is a statement by Keith Brown on ferry services to Orkney. The minister will take questions at the end of his statement, so there should be no interventions or interruptions.
17:00
I am delighted to be able to give my statement so soon after the Scottish Cabinet’s successful meeting in Orkney. I also recently had the opportunity to travel to Orkney by ferry, under the new management, and I enjoyed the usual Orcadian hospitality and some very helpful and pragmatic discussions with the islands’ council.
I was a little confused when the Labour Party asked for a ministerial statement on ferries to Orkney. I was not confused about the content—the Scottish Government understands the importance of ferries to the communities of Orkney and Shetland—but about the timing. The most recent events regarding ferries to Orkney and Shetland took place during the previous parliamentary term when the Scottish Government concluded its tendering of the northern isles ferry services contract. Serco was announced as the preferred bidder on 4 May. There was a short delay while one of the other bidders appealed the outcome, but the court found in the Government’s favour and the contract was signed on 1 June. The new contract commenced as planned on 5 July, following a well-managed handover period on which I must congratulate the staff of the outgoing operator, NorthLink Ferries, and the incoming operator, Serco.
Those events were certainly of public interest and they created understandable, if temporary, concern for staff and ferry users. Some members took the chance to speak to me at the time, but I do not recall any calls from Labour for a ministerial statement. By my reckoning, there were eight weeks between the announcement of the preferred bidder and the end of the previous parliamentary term. If I had been asked for a statement, I would gladly have given it. We are now in a new parliamentary term, looking ahead to new challenges and opportunities, including the new legislative programme announced yesterday by the First Minister. However, we have been asked by the Labour Party to look back for the next 30 minutes, so we will.
I have set out the main milestones that led to the successful handover to Serco on 5 July. Serco has chosen to trade as Serco NorthLink for the provision of the services, thus recognising the value that the communities attach to the NorthLink brand.
As I mentioned, I had the opportunity to use the ferry service when I travelled to Orkney on 9 July. As always, I was very impressed with the service and I recommend it to all members. The vessels that provide the services are among the best that we have in Scotland, although the latest ferry that we have introduced to the Hebrides, the £25 million MV Finlaggan, is of a similar standard, and the new £42 million ferry for the Stornoway to Ullapool route that I announced on 8 June will be a further step forward in technical prowess. That new vessel will use around a quarter less fuel than the current service, which is an important consideration given the Parliament’s climate change targets and ambitions.
The Serco NorthLink staff are, by and large, the same staff who have been providing an outstanding service on board and on-shore for many years. They continue to provide an efficient and courteous service and the on-board facilities are excellent.
There were those who were concerned about the change in operator. I can understand that. Change always brings uncertainty and it is the responsibility of the new operator to prove that it is up to the task. The feedback from customers and stakeholders that I have received is that Serco NorthLink has achieved that. It has adopted the NorthLink brand, employed the existing staff and is deploying the same vessels, so there has been much more continuity than change. The operator has planned improvements for the future that ferry users in Orkney and Shetland will welcome, I am sure.
One change that users, particularly those in Shetland, will notice and appreciate is that Serco NorthLink is taking a fresh approach to vessel overhauls. I understand that during the winter there will be no interruption to services, in contrast to the long dry-dock period of last year. That responds to the representations that I received from the local community, the council and the constituency MSP.
I also received representations from the trade unions about the position of their members. The contract that we put in place ensured the transfer of all those employees who wished it, with their terms and conditions intact. There was a particular concern about pensions, and strike action was briefly mooted by the RMT. Thanks to the contract’s provisions and the commendable response of Serco NorthLink management and the RMT in getting around the table, I am pleased to say that the issue was quickly resolved to the satisfaction, I understand, of the RMT. I plan to follow that up when I meet RMT representatives tomorrow afternoon.
In tendering the northern isles ferry services, the Scottish Government was doing nothing different from its predecessors. The Labour Party and, after devolution, the Liberal Democrats, were responsible for the award of three northern isles contracts: the first to P&O Scottish Ferries in 1997, the second to the original NorthLink, which commenced in 2002 and—when that contract failed—the third to the second incarnation of NorthLink in 2006.
We may not always support the tendering of public services. I am sure that many Labour members feel the same, but we are working to the same set of European rules to which they worked when they were in government. As Duncan McNeil, whose constituency includes the David MacBrayne headquarters, said when the Parliament debated the issue in 2005:
“The primacy of European Union law over United Kingdom law is long established. We might not like it, but we need to make the best of it. We need to meet our international obligations and our moral obligations to those who elected us.”—[Official Report, 14 September 2005; c 19046.]
When we have to tender public services, we have an obligation to do so efficiently and effectively and to work within the current rules. The northern isles tendering exercise attracted four high-quality and competitive bids. That ensured the continuation of a high-quality ferry service, as well as best value for public money.
Since 2007, we have allocated record sums of money to the ferry services in Scotland despite severe pressure on public spending and despite cost pressures, such as the rising cost of fuel. For example, in the previous financial year we absorbed an increase in subsidies to CalMac Ferries and NorthLink of around £14 million, which was due to fuel costs.
I also look to secure changes to the European Union rules. I have met the European Commission to point out the absurdity of having a maximum contract length for ferries of six years when, under parallel EU rules, rail contracts can be at least 15 years long. I will continue to make that case to the EU.
We have committed to publishing our final ferries plan by the end of the year. That will provide a blueprint for improvements to ferry services throughout the country, as well as a foundation for a long-term programme of investments in modern, efficient vessels and accompanying shoreside infrastructure. Those investments support jobs in Scotland, not only for the ferry operators but in civil engineering and shipbuilding.
I am proud that the Scottish Government has brought commercial shipbuilding back to the Clyde with the award of a contract for two cutting-edge hybrid ferries to Ferguson Shipbuilders Ltd. That not only safeguards 75 jobs, but creates 100 more jobs and, for the future, 20 modern apprenticeships.
Following the publication of the final ferries plan, we will focus on the next major challenge: the replacement of the contract for the Clyde and Hebrides ferry services, which expires in October 2013. The Government awarded the current contract to CalMac Ferries in 2007 following a competitive tendering exercise undertaken by the previous Administration. We will soon announce our plans for the procurement of the next contract.
I am aware that the trade unions have concerns about how their CalMac members might be affected. They raised the same concerns with me at the time of the northern isles tendering and I was able to work constructively with them and achieve an outcome with which all parties appear to be satisfied, notwithstanding the concerns that we share about the current EU tendering rules. I have two meetings with the unions planned for the coming weeks to enable me to listen to and respond to those concerns.
I assure members that I am always happy to come to the chamber and defend the Government’s record on ferries. As I have shown with the examples that I gave, we have achieved record investments, have maintained services despite severe financial pressures and once again see commercial ships being built on the Clyde.
I said at the start that I was confused by the request from Labour for this statement, but I hope that nobody is in any doubt about the strength and clarity of our commitment to our island communities and to the ferries that serve them.
The minister will now take questions on the issues that were raised in his statement. I intend to allow around 20 minutes for questions, after which we will move to the next item of business.
I thank the minister for making the statement, which we requested on the general issue of ferry services in the light of events over the summer, although the award of the NorthLink contract has been central to those developments and new information about that process has come to the fore.
We all agree that ferry services are lifeline services and have a crucial economic impact on our island communities, not least as employers. Is the minister aware that the RMT and Unite have raised concerns about what the decision to award the NorthLink contract to Serco, rather than to the publicly owned CalMac, means for the route and, indeed, for other routes that are to be tendered next year?
Does the minister recognise the concerns about the repercussions of that decision, including last week’s resignation of the chief executive of the David MacBrayne group and reports of disputes with ministers? Is it true that the minister or his officials instructed CalMac or the then directors at NorthLink Ferries not to appeal the decision to award the contract to Serco? Is it the case that, as has been reported, the CalMac bid was not more expensive than the Serco bid and that it was ruled out on a technicality that could have been challenged?
The minister has raised the issue of EU tendering rules. In his statement, he mentioned the replacement of the contract for the Clyde and Hebrides ferry services next year. Does he agree that that should be tendered as a single contract, which he is empowered to do?
A number of those questions go well beyond the remit of the statement that I have just made, but I will try to answer them when I can.
I tried to be a bit more general in my statement, to cover some of the issues that Mr Baker raised. As regards tendering, I am not sure whether Richard Baker is saying that we had a choice in the decision that we took on the awarding of the northern isles ferries contract. I do not know whether he is saying that we should have taken a different approach to that of the previous Administration. I read out Duncan McNeil’s fairly candid view on the need to follow EU regulations. Michael McMahon said the same. He asked the then Opposition members whether they were
“really prepared to allow the decision on the tender process to be taken out of the hands of the Minister for Transport ... and handed over to EU officials”.—[Official Report, 14 September 2005; c 19033.]
That would be the consequence of taking a decision that was not based on the best outcome.
Richard Baker asked whether I agreed to the NorthLink tender in the knowledge that the CalMac tender cost less. I have no idea whether the CalMac tender cost less. It did not qualify to be considered. It could not be looked at. That is the process, and we have to go by that process. I am clear that the outcome that we achieved by doing that is an improving ferry service, and a great deal of continuity and stability. I mentioned that the same vessels and, by and large, the same staff who provided the service before are still providing it. I think that that is a good outcome. In addition, there have been significant improvements, some of which—such as those relating to dry-dock arrangements, which people on the islands and stakeholders were unhappy about—have been mentioned. I am sure that there are further improvements to come.
Richard Baker also asked whether I had issued instructions to the CalMac board. I issued no instructions to the CalMac board, nor did Alex Neil in his capacity as Cabinet Secretary for Infrastructure and Capital Investment. As the major stakeholder in David MacBrayne Ltd, we have an obligation to make clear our view of the public interest and the stakeholder interest, but no instructions were ordered. I am confident that services to the northern isles have been improved and safeguarded. The fact that our expenditure on ferry services to the northern isles amounts to around £240 million gives some idea of the extent of this Government’s commitment to the lifeline services that those islands enjoy.
I remind members that questions should be on ferry services to Orkney.
I begin by expressing my shared enthusiasm for the integrity of the tendering process. I believe that the process that was entered into in relation to NorthLink Ferries is defensible—indeed, it would have been subject to a legal challenge had it not been. It is extremely important that we stand by the process, and I congratulate the minister on doing so.
However, his statement raises a number of issues—albeit that it raises rather fewer than some previous statements that I have heard—which I would like to address. First, the minister said in his statement:
“We may not always support the tendering of public services.”
I am tempted to ask, “Why not?” It is something that we should do more of.
The minister has my support in ensuring that EU rules are changed, if such change makes future contracts more attractive and produces more bidders. Will he guarantee that he will not make any attempt to influence EU rules to close down future tendering processes?
Has the minister learned any lessons during the NorthLink process that will facilitate an effective tendering process for the Clyde and Hebrides ferry services, to ensure that it attracts a range of bids—including, perhaps, bids from Scotland’s successful small ferry companies—that will offer an opportunity to provide high-quality services across the Clyde and Hebrides area at efficient costs for passengers and taxpayers, and that will make possible the same seamless transition that has taken place in services to the northern isles, should such a transition be necessary?
I will respond first to the point about tendering. As someone who worked for nearly 20 years in local government and was a councillor for 11 years, I have experience of the compulsory competitive tendering regime that was introduced by the Thatcher Government and the extraordinary costs, bureaucracy and destruction of many public services that it resulted in. That alone gives one an idea that public tendering is not always the best process, depending on the service that is being provided.
The second point is that there is no question that we will attempt to use EU legislation to close down competition; in fact, EU legislation is by and large designed to ensure that competition takes place. Alex Johnstone is right to say that the outcome of the process in relation to the northern isles shows that the Government is committed to carrying out that process as efficiently as possible. It can also result—and in this case, did result—in the most efficient way of providing a service. That can improve a service but does so with regard to the public cost, which is very important.
It is also true that the background information that we have had in relation to future tenders—the member mentioned the upcoming CHFS contract—suggests a very healthy interest, not least because of the tendering process that took place in relation to the northern isles. Of course, I have no way of knowing who will tender for those contracts; whether it will be a single tenderer, many tenderers or even whether some small tenderers will come forward, as the member suggested. We have decisions to take on those issues shortly. I do know that the appetite is there; people see these services as very important, and they know the extent to which the Government is committed to them. We are far from starting the process, but at this stage there is no suggestion that we will have anything other than healthy competition for those tenders.
I thank the minister for the advance sight of his statement. He may have enjoyed his trip on the Hamnavoe in July, but he was well advised to steer clear of it on Monday as it roller-coasted through the Hoy Sound.
As he will recall from his meetings and the correspondence with Tavish Scott and me earlier this year, the retendering of these lifeline services has raised a range of concerns for our constituents. Staffing terms and conditions have certainly been key among them, but adequacy of freight provision, cuts to sailings on the Pentland Firth, supplier contracts and future pricing arrangements have also been high on the agenda.
Picking up on a couple of those issues, I ask the minister whether he agrees, that to ensure a smooth transition and build on the excellent work done by NorthLink over the previous contract, Serco will rely heavily on existing crew and staff, and therefore must reach agreement with and provide certainty to those staff without delay. I am glad that he is meeting the RMT about that tomorrow.
Does the minister also agree that the extent of the cuts proposed by Serco to the sailings operating on the Pentland Firth route undermine his and Serco’s claims about delivering an improved service, and will he therefore urge Serco to look again at those specific plans?
I know that Liam McArthur was in favour of protecting, for example, the Scrabster-Stromness route and the 90-minute crossing. We did a substantial amount of work to make sure that those vital interests of the people of Orkney were protected.
On the wider issue of staff terms and conditions—although we are not the employer; the new contractor is—discussions have taken place with the relevant trade unions and employee representative groups. I understand that they have reached a satisfactory conclusion in relation to terms and conditions, which are not changing for the employees. I agree with Liam McArthur about the excellent service that the employees have given and continue to give, and I understand from the discussions between them and the employer that they are well pleased with the outcome of those negotiations thus far.
Obviously, we do not stand back completely dispassionately from those discussions, as we have an interest in ensuring that the service continues to run. So far, many of the issues that Liam McArthur has raised with me have been raised with the individuals concerned. One example is freight services, which we have talked about with stakeholders. After discussion, we seem to be reaching resolution of the issues, or being given reassurances that had perhaps not been obvious at the time when the tender changed.
I think that we are reaching a satisfactory conclusion—that was certainly the emphasis of the discussion that I had with Orkney Islands Council, which also raised concerns. Of course, we will continue to listen to any concerns that there might be.
A large number of members are seeking to ask questions. If questions can be brief and to the point, and answers similarly brief, we might just get everyone in.
I suspect that the minister answered this question in his statement, to a certain extent. Will he confirm that, in tendering the northern isles and upcoming Clyde and Hebrides ferry services, he is taking the same approach as that of previous Administrations, and that he is obliged to do so under EU law, no matter how much he likes or dislikes it?
That is a good point. I emphasise that we are following the same process as was followed by previous Administrations, which was laid down for us by the European Union.
That said, we are not content simply to accept the process. As I said, we think that the regulations are inadequate, at least in one important regard, which is the length of contract into which we can enter. I think that anyone can understand that the level of investment that is required for vessels is such that a longer contract period is required if investment is to be recouped. We should continue to put pressure on the EU to ensure that we can change the length of contract, as we do for trains and as can happen for buses and other public services. However, with the exception of the representations that we are making in that regard, we are following exactly the same process as previous Administrations followed in relation to the northern isles contract, as we will do in relation to the CHFS contract.
Will the minister take steps to ensure that protections for the NorthLink workforce under the Transfer of Undertakings (Protection of Employment) Regulations 2006 are honoured by Serco? Of course the company will seek to maximise its profits—that is the name of the game. However, it is crucial that we ensure that there are no cuts to jobs, pay or terms and conditions, to the detriment of the workforce and island communities.
The minister might be aware that Serco has not agreed to participate in the merchant navy officers pension plan. The union Nautilus International is looking at the matter.
I am happy to look at the issue, although the information that I have is that all the relevant organisations and trade unions were involved in the talks with Serco, which seem to have had a satisfactory resolution.
Agreement has been reached between trade unions, the employer and representative groups that terms and conditions that were previously enjoyed will be enjoyed in future under Serco’s management. To underline the point about TUPE, I should say that I met the unions many months before the contract was let and gave them assurances, which I think were important to them, that we would go as far as we could to insist on TUPE being respected. Those reassurances led to the terms and conditions agreement that I mentioned. We were concerned about the issue. We must have regard to contract law, but we have made it a priority to consider the interests of staff, which seems to have been successful on this occasion.
There is an element of duplication in my question. What discussions has the minister had with trade unions on the transfer of staff and the protection of NorthLink Ferries workers’ pensions?
I met the unions on 11 October and was happy to confirm with them our understanding that the TUPE regulations would apply. As I said, I will meet the RMT tomorrow afternoon and the other trade unions shortly thereafter.
Will the minister give details of discussions that he and his officials have had with Serco to ensure that the transport of livestock to and from Orkney and the export of fresh produce from the islands, including shellfish, remain key considerations in the service contract, given the importance of those industries to the Orkney economy and the islands’ reputation for quality?
That is a key aspect of the contract. We had substantial consultations with the stakeholders, freight companies and service providers involved. In the iterative process that was undertaken with each bidder, the issue was highlighted as crucial.
I am confident that the islands’ freight interests were taken into account and that the islands are being properly serviced by the freight companies. Of course, we are early into the new contract. If anything occurs that causes concern, we will be happy to look at the issue again.
Given the disruption under previous contracts to the NorthLink service between Scrabster, in my constituency, and Stromness, will the minister elaborate on what he said in his statement about the steps that are being taken to ensure that we do not see a repeat of the situation in which dry-dock problems caused ferries to be out of action for months?
I accept that the issue was not designed into the previous contract. As Rob Gibson said, the problem arose last year and caused substantial consternation on the islands. When I met people in Shetland in January, I said that the new contract would not allow such a situation to be repeated.
As I said, there will be no dry-docking whatever this year, and work that takes place on the ships will not lead to disruption to services. I think that that is a first for the contract.
Was best value considered as part of the letting of the contract? The minister is aware that in the past I have asked that councils be allowed to lease vessels from Caledonian Maritime Assets Limited. If that were the case, keeping all contracts in the public sector would allow more flexible use of vessels to cover maintenance and breakdowns, providing better value for the public purse.
I am not certain about what the member means by keeping the contracts in the public sector. The contracts have been tendered on a commercial basis for a number of years, including by previous Administrations. We have to go through that process.
As I have already mentioned, the process is no different from that which the previous Administration went through, and it is consistent with European legislation. If the member has particular suggestions or proposals to make about ways in which we can fund future ferry provision, I am, of course, happy to discuss them with her, but the process had to take into account the fact that the previous contract involved leases for the vessels that currently service the islands, which were entered into in a private arrangement some years ago. The vessels moved forward not just to the contract, but to the very end of it. The opportunity to undertake new ferry provision for the islands did not exist this time. However, if the member has a further suggestion to make about future contracts, I am happy to listen to it.
The minister indicated that Serco NorthLink has improvements planned for the future. Can he expand on how the new operator will improve the service that is delivered to the communities of Orkney and Shetland?
I have, of course, mentioned the dry-docking arrangements, which are very important to people on the islands. There is the knowledge that there will not be a nine-week period in which there is disruption to the services. That is crucial.
Beyond that, there is enough scope within the tender that we have agreed with the operator to allow it to take decisions on a commercial basis that might lead to improvement of the service. We have made very clear to the operator the need for the continuity and reliability of the service for passengers and freight customers, but there is, of course, always the potential for further improvements. I am aware that some improvements are being worked on, but it will be for the company to come forward with improvements when it is ready to make an announcement.
I thank the minister for mentioning me in his speech and for reminding people that I have had a concern about the issue since 2005. Indeed, for the completeness of the record, that was so much so that, on the day that was mentioned, I voted against the minister and my own Government because the minister refused to give assurances on the application of TUPE. Since then, of course, we have had the Gourock to Dunoon tender without the assurance of TUPE.
I will get to the nub of the matter. When the contract for the Clyde and Hebrides ferries, which is about to expire, is replaced, will the minister give assurances to those people who work at CalMac headquarters ticketing operation in Gourock that they will be protected in the process, unlike the people involved in the Gourock to Dunoon run?
Minister, you do not have to answer that question. If you like, we will move on to the next one.
Obviously, Inverclyde is quite a long way from Orkney, but I am prepared to answer the question.
I think that I have answered some of the questions that Duncan McNeil asked about terms and conditions and trying to protect them. We have an interest in that and we will push it as far as we can.
The point that I was making in quoting Duncan McNeil—I also quoted Michael McMahon, but I could have quoted Des McNulty and others—was about the necessity of following the relevant legislation. We will do that and, at the same time—
You stopped it happening.
No, we did not. It was tendered and the contract failed shortly afterwards.
We will look at staff interests. We have displayed that already, and we will meet a trade union tomorrow and other trade unions subsequently. That shows that we are taking that commitment seriously.
The most salient point from the minister’s statement is that we are still working to the same set of European rules that Labour and the Lib Dems worked to when they were in power. How will continued investment in ferry services in Scotland contribute to sustainable economic growth for not just our island communities, but the whole of Scotland?
That question raises an interesting point. We are often told—I am sure that previous Administrations were as well—that the majority of people in Scotland do not live on islands. People wonder why the Government spends the sums of money that I have talked about supporting the transport needs of what they perceive to be a relatively small number of people.
Our investment in ferries does not go just to people; it has wider benefits. As we have mentioned, island communities are at the forefront of key industries in Scotland, such as the energy, oil and gas, and renewables industries. Jamie McGrigor mentioned shellfish and other fishing interests. We should consider everything from Arran cheese and Islay whisky to Orkney beef, Shetland salmon and tourism. Such businesses may be island businesses, but they support and are supported by networks and supply chains across the nation. Our investments also support a large number of jobs—more than 1,500—in the ferry operators that provide the subsidised services and more in the ports. What I have said about supporting the services and investing in new vessels on the Clyde for the first time shows that we support the contracts and the services to the islands, because they also support the rest of Scotland.
Is the minister telling us that CalMac, which is a subsidiary of a company that is wholly owned by the Scottish Government, submitted an incompetent bid for the NorthLink contract? Was that the reason for the resignation last week of Archie Robertson, the chief executive of David MacBrayne?
That resignation is a matter between Archie Robertson and the board of CalMac.
I did not say that the bid was incompetent; I said that I had not seen the figures that attached to it, because it did not pass the final stage. I will go no further than that just now, but I will say, for the last time, that the ferry service in the northern isles replicates the best elements of what we had before and will further improve them.