Air Discount Scheme
The final debate is a members’ business debate on motion S4M-01157, in the name of Liam McArthur, on the air discount scheme changes. The debate will be concluded without any question being put.
Motion debated,
That the Parliament notes the benefits that the Air Discount Scheme has brought to Scotland’s island communities since it was first introduced in 2006; considers that, even with the Air Discount Scheme reduction, the cost of flying to and from the islands imposes a considerable financial burden on island life; understands, therefore, the very real concerns that the exclusion of business travel from the Air Discount Scheme has caused for businesses as well as the public and voluntary sectors in the islands; considers that the change, on which there was no prior consultation, means that businesses and other organisations now either have to face even higher travel costs or have to miss out on opportunities to take part in meetings and other events on the Scottish mainland and further afield, and would welcome an urgent review of the impact of the exclusion of business travel.
17:09
I am delighted to have the opportunity to lead a debate on an issue that I have been pursuing over many months, as I know the minister will testify. Before I turn to my specific concerns about the decision to cut any and all work-related travel from the air discount scheme, I want to acknowledge the cross-party support my motion has received and I thank all those who have signed the motion and joined me in calling for ministers to review the decision. I look forward to hearing colleagues’ contributions as well as the response from the minister.
I shall set out why I think the decision must be not only reviewed but overturned. In making that case, I shall highlight the damage the cut is already causing and is likely to cause as well as the entirely spurious basis on which the decision was made.
It might be helpful if I start with a little historical context. The air discount scheme was introduced in 2006 by my colleague, Tavish Scott. It followed years of debate about how to address the real social and economic disadvantage suffered by communities across the Highlands and Islands as a result of the high cost of accessing lifeline air services. Providing a 40 per cent reduction on air fares for all those mainly resident in the islands and the north and west Highlands was a very deliberate attempt to level the playing field. As someone born and brought up in Shetland, Tavish Scott understood fully the inextricable link between economic development on the one hand and social cohesion and population retention on the other.
It is that link, presumably, that convinced the European Commission that the scheme was indeed a genuine aid of social character. The same link, however, was completely ignored by the Scottish Government in choosing back in April arbitrarily to remove work-related travel from the scheme. In seeking to justify their decision to cut the ADS, Scottish ministers made three claims. The first was that it was never the intention of the scheme to cover work-related travel. The second was that the scheme risks contravening European Union state-aid rules, raising the possibility of fines and potential clawback. Finally, Mr Brown told me that
“we do not believe that a publicly funded scheme should be used to subsidise public and private sector travel budgets.”—[Official Report, 23 December 2010; c 31968.]
Let me take each of the arguments in turn. First, it is ludicrous for Scottish National Party ministers to argue that they know better the intentions of Tavish Scott, Jim Wallace and those responsible for putting in place the ADS. Indeed, presumably Mr Brown’s predecessor, Stewart Stevenson, had the same intentions when he rolled forward the ADS unamended in 2008, or is the Government now saying that Mr Stevenson did not know what he was doing?
The second argument—that the scheme somehow contravenes EU state-aid rules—is equally specious, or suggests that the Government believes the Commission does not know what it is doing. The truth is that similar schemes are in operation across the EU, in the Balearics, Madeira, Guadeloupe, Martinique, Corsica and, most recently, the German islands. When the Corsican scheme was approved in 2005, the announcement specifically stated that
“the Commission considers that living on an island can be a disadvantage which justifies transport aid”.
So, it is clear that the Commission had no concerns about the scheme operating in the Highlands and Islands and would have been content to sanction a further extension from April 2011. Scottish ministers, who admit to carrying out no assessment of other schemes operating in the EU, have used state-aid rules as a smokescreen to press ahead with cuts to the scheme that were both unnecessary and potentially hugely damaging.
Having applied for the removal of work-related travel from the ADS, ministers have succeeded in building those new conditions into the scheme approved by the Commission. At a meeting in June with Tavish Scott and me, the minister and cabinet secretary agreed to seek further guidance on the Commission’s position. That seemed like a half-hearted attempt to close the door after having pushed the horse into bolting. The fact that the same undertaking was then made to the leaders of the three islands councils three months later confirmed a total lack of urgency or a total lack of appetite by ministers to deal with the issue seriously.
The final argument used to support the cut to the ADS is that public funding should not be used to subsidise business travel. Again, that is nonsense. When tolls were removed from bridges across Scotland, businesses were not asked to keep coughing up. In announcing plans in January to extend the scheme to Colonsay residents, Mr Brown said the Government recognises
“the social and economic benefits that an extension to this scheme will ... bring”.
Ministers boast of the benefit to businesses in the Western Isles of the road equivalent tariff, or RET, the record-breaking pilot scheme targeted solely at that community for reasons best explained by SNP strategists. In that case, the subsidy to business comes at a cost not just to the public purse but to many businesses in Orkney and Shetland that have seen the displacement of tourism traffic and a competitive advantage handed to counterparts in the Western Isles.
The reasons offered by ministers for cutting the ADS simply do not stack up. Perhaps that explains why there was no prior consultation on the proposal, which was slipped out in budget documents last December. In a recent survey of businesses, charities, voluntary groups and the public sector in Orkney, almost 60 per cent of respondents said that they were unaware of the cut before its introduction in April. Even now, 73 per cent say that they do not know how the cut would be enforced. Indeed, the advice from the Government and some of its back benchers seems to be, “Don’t ask, don’t tell.” That is a ridiculous situation that is giving rise to confusion, inconsistency and, increasingly, anger.
Likewise, assessing the impact of the decision—in the islands at least—has been left to Tavish Scott and me. The feedback over the summer shows that damage is already is being done to business competitiveness, skills training and the ability of charities, voluntary organisations and public bodies to participate in events and networking opportunities on the Scottish mainland. Some 77 per cent of respondents to the survey that I carried out on Orkney insisted that they will have to cut back on the flights that they make, over and above the decisions that they had already taken as a result of the economic climate. Even so, almost half confirmed that their travel costs will still increase. One firm said:
“Air transport is a vital link for us, allowing us to forge new links with suppliers/contractors, negotiate becoming involved with public/private funding opportunities and bringing new money into Orkney. To attend conferences raises our profile and the profile of the county, especially in terms of marine renewables”.
Another firm said:
“the ability to travel and participate in relevant events is essential, not just to our business, but to ensure Orkney has properly skilled people locally and to keep them in our economy”.
Another firm talked about the risk that the cut to the ADS and an inability to travel could
“result in housing in the isles becoming marginalised”.
The evidence therefore shows that the cut to the ADS has increased costs, eroded business competitiveness and undermined efforts to improve skill levels. Over a period, the risk is that businesses, voluntary groups and the public sector in Orkney will become more isolated from wider networks and the places where decisions that affect them are taken.
There is also a clear threat to the lifeline routes themselves. The service between Kirkwall and Inverness has already been reduced following a sharp decline in passenger numbers that was directly prompted by the ADS cut. The figures for September are not yet out, but from anecdotal evidence and from speaking to staff at Kirkwall airport, I believe that there is a real danger that we will see passenger numbers continuing to fall dramatically.
The situation is not sustainable. Asking ever-smaller numbers of passengers to pay ever-higher prices to fly is a recipe for disaster, particularly for a lifeline air service.
The basis for the decision to cut the ADS is untenable, the impact is unsustainable, and the case for a rethink is now unanswerable. I hope that the minister recognises the strength of feeling and the breadth of support that the campaign enjoys, and that he will confirm his intention to reverse the unnecessary, ill-founded and damaging cut.
17:17
I simply have a few questions about Liam McArthur’s motion.
At the start of his speech, Liam McArthur said that he would show how dramatically awful the situation is with the removal of the ADS for businesses, but he singularly refused to do that. He has not given evidence on that. I am interested in the alternatives that we might consider.
My reading of the European Commission paper is that, when the air discount scheme was introduced in 2006, it was heavily biased towards individuals. The paper says:
“The aid must have a social character, that is, it must, in principle, only cover certain categories of passengers travelling on a route such as children, handicapped people, people with low incomes, etc. However, in the case where the route concerned links an underprivileged region, the aid could cover the entire population of this region.”
So it does. Individuals are free to take advantage of the scheme.
The SNP Government has introduced other business aids through rates and the promotion of food and drink, for example. Shetland, Orkney and the Western Isles have taken advantage of those opportunities and the determination to link people by broadband.
I am not defending what has happened, because it is always difficult to take away a service that has been offered. I am sure that the minister has a view on that, but I am sorry that Liam McArthur has not addressed some of the positives of the air discount scheme as it stands.
In this day and age, encouraging business travel is pretty outdated. In Shetland, we have one of the finest departments in a college promoting videoconferencing. Surely it would behove Liam McArthur to propose a members’ business debate on how we shake up the Parliament and, indeed, central belt Scotland and make them recognise that that is the direction in which we have to go. Communication is about a lot more than taking a flight, which does not fit with any carbon-reduction agenda.
There is a big debate to be had but, sadly, this debate is not it and has not contributed to it.
17:20
I congratulate Liam McArthur on his initiative in securing the debate on the air discount scheme. I strongly support and endorse his comments and hope that my speech will add cross-party support to the campaign to keep business, local authority and third sector air travellers within the scheme.
The European Commission approved the ADS for the Highlands and Islands on 11 May 2006 on the basis that it was aid of a social character. It was an initiative by the previous Administration to make air services more affordable for remote communities and was aimed at addressing low gross domestic product and peripherality.
There is good custom and practice throughout Europe for similar schemes. We have heard about schemes in Corsica and Madeira and for the German islands. I spoke recently to Councillor Angus Campbell from Western Isles Council, who told me that he could find no definition of “aid of a social character”. However, in its decision on Corsica—Liam McArthur mentioned this as well—the Commission said:
“the Commission considers that living on an island can be a disadvantage which justifies transport aid”.
In that announcement and all other relevant announcements, no restriction is imposed on the purpose for which an individual travels, so I have a simple question for the minister: where did the decision to exclude business passengers—by which I mean private, public and third sector employees on work activities—come from?
In his reply to my written parliamentary question on 29 September, the minister said that excluding the above groups would save around £2.7 million. Let us put that another way: that means additional costs of £2.7 million for business, local government and the third sector in the Highlands and Islands.
Let me be straight: the minister should come clean, stop blaming Europe and accept that it was a simple cost-cutting exercise. I have spent a lot of time examining the matter. The European Commission approved the scheme in May 2006. More importantly, it reaffirmed that the scheme was correct under state-aid rules in 2008 and agreed it again in March 2011.
However, there are some exemptions. Public service obligation routes, people who live outwith the area and national health service funded trips are not covered. That is clear and no one disputes it, but there is no mention at all of an exemption for business trips.
The European Commission wrote to William Hague and said that it did not encounter any problems in the scheme. I ask the minister to confirm that the Scottish Government did not take it upon itself to consult the European Commission before making the sea change in policy that has hurt island businesses so much.
If the minister disagrees with me—I suspect that he does—will he agree to put the advice that he has received in the Scottish Parliament information centre? Why can business users in Corsica but not in Castlebay access the scheme?
The Scottish Government asked Halcrow Group Ltd to review the scheme in August 2007. It said:
“ADS has been well received in the eligible regions and has had a positive impact on making air services more affordable in the most peripheral regions of the Highlands and Islands”.
The review concluded that the scheme should be continued in its current form beyond March 2008 as part of a long-term strategy of increased connectivity to more outlying communities within the Highlands and Islands. There was no mention of cutting business users out of the equation.
That review was sponsored by the Scottish Government—the minister’s own Government—so where did the idea come from? I do not know whether the minister is a smoker but, if he is, it looks like the idea appeared as a small doodle on an equally small fag packet. Unfortunately, it has had large implications for the Highlands and Islands.
There has been outrage throughout the business community because of the changes. I have stressed the effect on business, but let us not forget about local government. Western Isles Council tells me that the cost per year of the measure will be £75,000 and Shetland Islands Council tells me that the cost will be £250,000.
Will the member give way?
Do I have time to give way, Presiding Officer?
Yes.
Does the member acknowledge that Western Isles Council has on a good number of occasions block-booked seats that it has not used, which has deprived ordinary citizens of seats on flights? Surely that is an abuse of the ADS.
I would be happy to raise that issue directly with Western Isles Council’s chief executive, but that is not my point today. My point is about why the change has been made, because it is inconsistent with European Union rules.
Orkney Islands Council tells me that the change will cost it £140,000.
I will conclude, as I am running out of time. The ADS was well received across the Parliament when it was introduced in 2006. The aim of making air services affordable for remote communities in the Highlands and Islands is a vital plank of social inclusion. As I said, the scheme received a glowing assessment from the Scottish Government’s own review in 2008 and there was no intention to withdraw it.
My suspicion—which is shared by many who are, like me, interested in aviation—is that the changes are cost driven and that the European Commission was perfectly content with the scheme in 2006, which it approved with no business exemptions.
Will the member take an intervention?
No—David Stewart is in his last minute.
No—I am in my last minute.
I challenge the minister to show evidence to the contrary. He has some explaining to the Highlands and Islands business community to do. I thank Liam McArthur again for his initiative in securing the debate.
17:26
I congratulate Liam McArthur on securing today’s debate, which is significant to the many communities in the Highlands and Islands—in Colonsay, Orkney, Shetland, the Western Isles, Islay, Jura, Caithness and north-west Sutherland—that are eligible to take part in the air discount scheme. The scheme is of particular value to my constituents in the remote island communities who do not enjoy the benefits of the road equivalent tariff scheme on ferries.
As Liam McArthur said, the air discount scheme has made a difference to many of my constituents since 2006. It is popular and well used. David Stewart made a strong point very well: that the money that the Scottish Government has saved by getting rid of the discount’s business element is being paid for by the island businesses that are no longer part of the scheme.
Earlier this year, the EU gave its agreement for the scheme to continue for a further four years until 2015. We need a scheme to tackle the problem of high air fares for the remotest communities in the Highlands and Islands. What sustains island communities, if not business?
Like Liam McArthur, I am aware of the genuine concerns because of the decision to exclude business travel from the scheme from April this year and because of the impact of that on businesspeople and those who are involved in the charity sector, including representatives of religious organisations, such as the Western Isles presbytery of the Free Church of Scotland, who are often short of money. I agree with him that it is disappointing that the decision was taken without the relevant communities being consulted.
The detailed 2008 “Review of the Air Discount Scheme” concluded:
“Most stakeholders agree that the ADS has had a positive impact on businesses and commercial inclusion as it enables them to reduce their travel budget and journey times or to travel more frequently for the same travel budget as before.”
Orkney Islands Council’s leader, Stephen Hagan, was right to say:
“As well as the additional cost to the Island Councils, other public sector bodies, businesses, voluntary and charitable organisations, there is a real risk that the number of passengers travelling by air will fall, leading to a corresponding reduction in the level of the air service in the future.
This has the potential to impact on all potential users of the air services to and from remote island communities.”
The exclusion of business travel from the scheme is an important issue for many of my constituents. I am pleased to support Liam McArthur’s call for a review. The issue is especially important to the island of Barra, which has been notoriously difficult to get to. Barra’s airport is famous and makes the island famous, and it is one feature that draws businesses there. I hope and am sure that the minister will reply positively and constructively.
17:29
As Dave Stewart did, I congratulate Liam McArthur on securing time to debate this important issue. My colleague Alasdair Allan, who would have liked to be here, sends his apologies—he is at a British-Irish Council summit elsewhere.
It is fairly obvious from the speeches that we have heard so far that we do not have consensus on the exclusion of business-related travel from the air discount scheme. I had hoped that those who had been opposed to the Scottish Government’s position—as they have every right to be—would understand, even if they do not appreciate, the rationale for exclusion. I also hope that they agree that I have given due time and consideration to them and to the concerns emanating from the eligible areas.
Will the minister take an intervention?
No. I am just starting off.
Since we confirmed the more active exclusion of business-related travel, I have met Mr McArthur and other elected representatives from Orkney, Shetland and the Western Isles and I have clarified our position with a number of local organisations. Our submission to the European Commission reflected on some of those representations.
I have listened carefully to the speeches this afternoon—not all of which were positive and constructive, I have to say—and I will continue to listen to any representations that are made to me. I am aware that Liam McArthur and Tavish Scott wish to present the findings of an Orkney and Shetland business survey to ministers, so I would be happy to meet them to take delivery of it.
A number of points that have been made deserve to be responded to. Clearly, the more active exclusion of business-related travel has impacted on some businesses—a point that I accept was made by a number of members—as well as on public sector and third sector organisations. We have maintained that the ADS was not designed for such use. That does not mean that we do not recognise and value the vital contribution that those businesses and organisations make in our remote communities.
The minister might be about to touch on this. I just want to put this simple point to the him. I can understand that his Government might wish to remove business travel as a cost-cutting exercise—that is a decision of the Government. My point—and, I think, Liam McArthur’s point—was that he should not blame Europe for that. My strong understanding from senior officials in the European Commission is that no such application was made. The scheme was approved, with business travel in it, in March. It is the minister’s Government that has removed it. The European Commission did not advise or instruct it in any way; if the minister chooses to make an application and removes business travel, that is another thing. My point is, can he be clear with us today that the move was not initiated by the European Commission?
I am coming to two rebuttals to that point.
We have reflected the vital contribution that businesses and organisations make in the level of resource that was allocated in 2011-12 to transport in the Highlands and Islands. We have allocated funding of £35 million for air services, £109 million for ferry services and £32 million for roads.
Our support for local government and the third sector also needs to be considered in this context. Despite UK funding cuts—it is a rich irony that the parties that are telling us that we have to cut our budget by £1.3 billion come up with an ever-growing list of demands for what they want to spend money on—local government’s share of the 2011-12 Scottish budget was preserved at previous years’ levels following on from the previous increases. For the next three years, local government’s revenue funding will be maintained and its overall share will still be higher in 2014-15 than it was in 2007-08.
Over the next three years, we will provide the third sector in Scotland—a major part of this debate—with nearly £74 million compared to funding of £62 million in the final three years of the previous Labour-Liberal Democrat Administration.
Will the minister take an intervention?
I want to make more progress. If I have time at the end, I will come back to the member.
These are undoubtedly testing times for the public and third sectors in Scotland, but the figures illustrate that we are doing as much as we can to help.
To address Dave Stewart’s point, members will be interested to hear that within the past 48 hours we have received the Commission’s informal view on business-related travel under the ADS. Clearly we need time to consider the full implications, but the advice on “undertakings”—that is, organisations that are involved in economic activity—is absolutely clear and unequivocal: they should not profit from a scheme that was introduced under the Commission’s mechanism for aid that is of a social character . Although that would apply to private businesses, both large and small, we need to consider how it would apply to other bodies for which economic or commercial activity is not their raison d’être, but which could be considered to have economic or commercial interests. That is the Commission’s view. That is what it has told us. It has said, as it often does, that the advice is informal at this stage and it will have to come back to us. There will have to be further dialogue.
Members will also wish to note that the Commission has stated that member states are free to restrict support under aid of a social character schemes in a variety of ways, including for the purpose of travel. Indeed, the Commission has indicated that there is a precedent for this in another member state. Our position on business-related travel therefore appears to cause the Commission no concern whatsoever and I have to say—this is an important point—that this is completely in tune with the discussions that Scottish Government officials had with their Commission counterparts in 2006 when it was clear that businesses were not to be included under the scheme. The idea that this was, to quote the various adjectives used, “spurious”, “untenable”, “specious” and “not consistent with EU rules” is wrong. That is the EU position: we asked them for their view and that is what they have come back and said to us.
It is very clear that the Commission looked at this three times and approved the scheme with business in it. There is a world of difference between that and the Commission recommending to the Government that it change the scheme because it does not comply with EU rules. If a member state goes to the European Commission with an approved scheme and wishes to withdraw an element of it, the Commission will approve that. The minister’s civil servants recommended the change—not the European Commission.
Mr Stewart has made more of a speech in this final contribution than I have. We have to consider carefully what the Commission has said. Maybe that will clarify some of the points that Dave Stewart raised and how the matter will impact on the scheme. I am trying to keep my mind as open as I can, unlike some previous contributors.
I understand that there is a real desire in the eligible areas to draw a line under the issue in general terms and I share that desire. We will therefore give timely consideration to what we now have and will report back shortly to all the scheme members and their representatives who are present here today. I hope that we can then begin the process of moving on in the interest of concentrating on this important issue. We are very concerned about business, whether it is in the northern isles, the Western Isles or other parts of rural Scotland. That is why, as Jean Urquhart rightly said, we have provided millions of pounds in support for businesses under the small business bonus scheme and the various other things that I have mentioned. Our intention is to make sure that the air discount scheme, for its part, is as well used as it should be by those who are resident in our most remote communities.
Meeting closed at 17:37.