Ferry Services (Northern Isles)
The next item of business is a debate on motion S1M-1467, in the name of Sarah Boyack, on a draft undertaking by the Scottish ministers under section 2(1) of the Highlands and Islands Shipping Services Act 1960. I ask all participants to keep their remarks tight.
I thank the parliamentary authorities for agreeing to let us present this draft undertaking for debate today. I should explain to those members who have not been involved in the consideration of an earlier draft of the undertaking why we had to present a new version. This is the final parliamentary process for awarding a subsidy for the future operation of passenger ferry services to the northern isles from 2002. It is the culmination of a long tendering process, which contained many complex issues that we have had to resolve. I thank all those who have been involved in ensuring that we could debate this today.
On 6 October, I announced that NorthLink Orkney and Shetland Ferries was the preferred bidder for the subsidy award. NorthLink is the joint venture of Caledonian MacBrayne and the Royal Bank of Scotland. Our negotiations with the company were concluded at the end of November when we brought forward an earlier draft undertaking.
A problem arose late on Monday 11 December with the collapse of NorthLink's plans to build one of three new vessels at Fergusons. On Tuesday, I expressed my disappointment about that development to the Transport and the Environment Committee, and explained that plans were being made to find an alternative yard.
I am pleased to say that NorthLink has agreed terms and a price with an alternative yard, on the basis of the same specification. A letter of intent has been issued to Aker Finnyards, which is the Finnish yard that will supply the other two vessels for the routes.
However, we have had to take account of the effect of the new price for the Pentland firth vessel—the 100m vessel that Aker will supply—in the grant agreement. An adjustment to a clause in the agreement has been required, which in turn has meant that we have had to introduce a new undertaking. The change that is required is in clause 3.8 of schedule 1 to the draft undertaking. It reflects a sharing of the extra costs of providing the new vessel by the Executive and NorthLink. If funds are needed for the final price, the effect will be to increase the subsidy by a maximum of £400,000 per year above the average annual subsidy, at April 2000 prices, of just less than £10 million per year.
On the time scale, we have been working to the target of securing parliamentary approval by the end of the week. That allows the other contracts that are involved to be finalised, and the timings for the shipbuilding intervention funds to be met. We plan to be in a position to sign the relevant agreements next week.
We do not have the scope to delay the timetables past the target dates of 1 October 2002, because at that date the current vessels will not be able to continue under the international safety requirements for all passenger ferry services.
Given what the minister said about Fergusons shipyard, which is in my constituency, will the minister give an assurance that the decision that Fergusons took, which is regrettable, will not rule that yard out of consideration for future orders of this kind?
Of course, that decision does not rule Fergusons out of consideration for any future ferries that might be commissioned. The Scottish Executive is keen to ensure that all our ferry services in Scotland have boats that are fit for purpose. Although the decision was regrettable, it will not stand in the way of future contracts.
I will emphasise some of the key benefits that the contract will bring to people in the northern isles. It is a good deal for people. This is a major opportunity to make improvements in the services. I set out many of the details to the Transport and the Environment Committee. I apologise to members of that committee who are present and will have already heard these points, but I think that it is important to make other members aware of them.
There will be three new vessels on the routes. They will be the first new vessels serving the routes since the early 1970s. I know from members for that area just how important that is for people who rely on these services. There will be services and timetable improvements. There will be improvements to the Pentland firth crossing time and additional journeys; an increase in the number of Shetland services and improved departure and arrival times in Shetland; and an increase in the number of services from Aberdeen to Orkney. Lower fares are planned. There will be a reduction in average passenger fares from April 2000 prices of 18 per cent. There will be a lower subsidy. At present, the Executive subsidy is £11 million; in future, the average subsidy at April 2000 prices will be just over £10 million per year.
Many of those improvements reflect detailed consultation with the local communities, councils, and others who rely on the services. We made a commitment on that at the start of this process and it was important to follow it through.
This has been a fair and open process. We have closely followed the relevant procurement and competition requirements under European Commission rules. We have also gone to significant lengths to have separate arrangements in the Executive for dealing with the contract and the sponsorship of Caledonian MacBrayne and its role as joint venture partner in NorthLink.
Overall, this represents a good deal for the islands and I hope that everybody who is concerned will welcome it. I pay tribute to P&O Scottish Ferries, which has served the islanders on these routes for many years. It is right for Parliament to recognise that.
The fundamental issue is that we are delivering on our key policy of supporting lifeline ferry services. That policy is delivered by the undertaking that we are considering, which represents a good deal and value for money.
I move,
That the Parliament approves the Draft Undertaking by the Scottish Ministers under section 2(1) of the Highlands and Islands Shipping Services Act 1960.
I welcome the minister's statement. The SNP welcomes the improved levels of service and the new services that are being brought to Orkney and Shetland. We share the minister's views on P&O. The northern isles passenger ferries, which are the subject of the draft order, are a vital lifeline for Orkney and Shetland. The present operator, P&O, carries about 239,000 passengers a year.
No one in the chamber should be in any doubt about the impact on those services if we do not pass the draft order today. The Parliament must give its approval to ensure that the undertaking can be signed at the eleventh hour. However, that does not mean that we are entirely happy about the processes that led to today's rushed business. That rushed process creates a perception of panic.
I have three questions. First, how can we better ensure that work for the construction of new ferries is won by Scottish yards in future? Given that the process was started two years ago, surely it was not beyond the capacity of Government to ensure that the appropriate advice and guidance was made available to those yards in Scotland that may have been able to bid. For example, surely the problems related to the lack of design capability in the industry could have been foreseen.
That design capacity shortage was created by the high level of work that is going to yards across Europe as the end of the subsidy round is reached. Given proper advice and guidance, perhaps Fergusons at Port Glasgow would have been able to develop coping mechanisms to secure the necessary design capacity at an earlier date. With a bit of joined-up government, perhaps Fergusons would have secured the contract and the prospect of new jobs. Two ferries are being built in Finland—
Will the member give way?
I will accept a limited intervention, as time is tight.
I think that I am being misled by Bruce Crawford. Is he suggesting that it is the Government's fault that Fergusons took a commercial decision to hand back the order, as a consequence of which the order is going to Finland? I have never heard of such a situation in 30 years.
No, but I shall come to that point. I am talking about the delay between the beginning and the end of the tendering process. If we had entered and completed the process earlier, perhaps Fergusons would have been in a better position to secure the design capacity that it was looking for.
Now three ferries are going to Finland, which provides an interesting comparison with Scotland. It has a similar size of population and a tradition of shipbuilding. The difference is that Scotland has five yards, which employ 10,000 people, while Finland has 11 yards, which employ 30,000 people. With greater input from the Government, I hope that we will be able to develop an industry that matches that of Finland.
Secondly, if the tendering process was started two years ago, why did the contractual difficulties come to light only at the eleventh hour? I understand that the original timetable for the process was for a final decision on the preferred bidder to be made in or around July. What on earth went on between July and the beginning of October? What caused such a lengthy delay?
Yesterday, I spoke to ferry operators, including companies that had submitted bids, who used the words "fiasco" and "shambles". While their reaction might have been more to do with perception than reality, the minister should reflect on that and explain what caused the delay. Otherwise, it might be reasonable to conclude that, had the delay not occurred, Fergusons would have had a greater breathing space in which to develop the design capacity that the yard needed. Given the apparent timetabling difficulties, would it not be appropriate for the minister to review the Executive's tendering and contracting procedures to ensure that, next time, they will be more robust and reliable and will contain built-in earlier warning mechanisms?
Thirdly, and finally, if, as a result of the change of shipbuilder, the level of subsidy is to increase, what impact will there be on fair competition? I know that the minister mentioned that earlier, but I seek further assurances. Do the other ferry operators that were involved in the process not have a legitimate argument that the original ground rules have been altered? Can they not claim, with some justification, that they entered into a tendering process in good faith? Had they known that the terms of the contract were to be different, they might have submitted tenders on a different basis. Does that not open up the Executive to—
Will the member give way?
I am just coming to my final point. The minister will have the chance to sum up the debate.
I was going to answer Bruce Crawford's questions.
The minister can answer my questions later. If she had taken interventions in earlier debates, she might find members easier to deal with on occasions like today.
Does the minister agree that the situation opens up the Executive to the threat of litigation from an aggrieved ferry operator?
These issues are serious and deserve serious answers.
I see the Presiding Officer is telling me to hurry up, but I am now five seconds ahead of schedule.
I regret that this matter had to come before the Parliament, but I realise that the urgency of coming to a decision this week meant that the matter could not go back to the Transport and the Environment Committee. In its discussion on Tuesday, the committee accepted that that was fair.
I have no points to make about the tendering process or decisions. I wish to comment only on the financial issues. As far as I can see, once a preferred contractor has been designated, the Government becomes locked in, the shipyards become locked in and the ultimate customers for the services become locked in, even though detailed negotiations with the contractor may result in changes to the terms that were originally offered.
I deeply regret the loss of the order for Fergusons shipyard and I want to register my concern for both the potential loss of employment and the loss of potential employment. I am sure that the minister will respond to the points that Bruce Crawford made. I hope that she will guarantee the Parliament that, if there are lessons to be learned about procedural or tendering matters, those lessons will be learned.
This Parliament's principal concern must be to approve the necessary financial arrangements to ensure that the orders can be issued and to ensure in turn that the new ferry services can be in place in late 2002 when the new European regulations will come in. The viability and accessibility of the communities in Orkney and Shetland must be our first concern.
I will support the minister's motion. I am satisfied that all has been done that needed to be done to ensure that the new ferry services will be in place and I am satisfied that this afternoon's motion will lead to funding being available. I am also satisfied that the Executive, at the Transport and the Environment Committee this week, was able to outline its contingency arrangements in the event that reallocating contracts caused any of the desperately tight time scales to be missed. Having made those comments, we intend to support the motion.
As the MSP for Shetland, I welcome the minister's announcement; I know that the MSP for Orkney will welcome it too. When we have the new ships, I look forward to Mr Andy Kerr and his committee arriving on one of them. When I was on the Transport and the Environment Committee, I used to suggest to Andy, Kenny MacAskill and Murray Tosh that they travel north. They should come up on the new ship, and I will meet them at the other end, having flown up earlier in the day.
I welcome the minister's announcement of new ships, improved frequency and lower fares. I have a number of questions that I hope will be dealt with in the summing up. Delaying the initiation of the contract until 1 October was the sensible decision. However, I am sure that the minister recognises that some practical issues will have to be resolved. For example, 1 October is in the middle of the livestock shipping season.
Will the new arrival time for the ships allow adequate time for the training of new crews? What pressure is the minister applying to ensure that we get sensible decisions on European funding for port facilities? I know that that is also a concern of my friend and colleague Mr Jamie Stone at Scrabster. The right decisions must be taken on European moneys for causeways in the Western Isles. That applies also to the facilities that the minister is aware of at Kirkwall, Scrabster and Lerwick.
I met representatives of Lerwick Port Authority last Friday, and I would like the minister to pick up on the points that they put to me. Not only is there a need for an extension to the quay because the new ships are larger, and not only is there a need for a covered walkway to allow people, especially those with disabilities, to access ships without having to go up lots of stairs, there is also the issue of the moving of the terminal. The package of measures that the port authority wishes to put in place will cost some £3 million. Given the lifeline nature of the service, what is the minister doing to ensure that that package of measures can be put in place and that the new ships can arrive and berth securely in October 2002?
I would like to place on record my disappointment with the way in which the Transport and the Environment Committee was involved in the draft order. We did not play our full or usual role because of the difficulties that the Minister for Transport outlined. I hope that in her summing up she will reflect on that and ensure that it will not happen again. The loss of work for the Scottish yard is sad. Bruce Crawford and other members of the Transport and the Environment Committee have covered that.
The members of the committee showed a mature and responsible attitude when the matter was brought to the committee. We took the view that because of the strategic importance of the service the procedure we are discussing was the only way to deliver what is needed. We will get the three new vessels and the timetable improvements that the Minister for Transport spoke about—the reduction in journey times and increased frequencies. Lower fares will be very welcome. The committee felt that the best decision we could take was to allow the minister to bring the matter to the Parliament in this way. I say to Tavish Scott that I look forward to using the ferry and to an evening in the very salubrious mansion house accommodation that I understand he has on the island.
I represent the West of Scotland, where Fergusons is situated. I speak in bewilderment rather than with the experience of members of the Transport and the Environment Committee. After a visit to Fergusons on 19 June I placed a parliamentary question asking when a decision was to be made on the award of the NorthLink ferry contract. The reply on 4 July said:
"Costed bids for the Northern Isles Contract were received on 23 June, and a decision on preferred bidder status is planned for July."—[Official Report, Written Answers, 4 July 2000; Vol 7, p 320.]
I have on file the fax that I sent to the managing director of Fergusons on 1 November.
"I see that Ferguson Shipbuilders has won the Northlink contract for the roll-on roll-off ferry."
I said that I was delighted.
I want to know why there was a four-month delay between the date given in the Minister for Transport's reply to my parliamentary question and the placing of the order at Fergusons. Who was responsible for that? Were there circumstances beyond our control? Did someone drag their feet and, if so, who was it? Were there technical reasons for the delay and, if so, what were they? Were there political reasons for the delay? I am fairly sure that there should not have been.
Was the Minister for Transport aware that there would be a rush of orders throughout Europe to meet the deadline for intervention funding on 31 December 2000? If she was aware, was she also aware of the shortage of design capacity in Europe? If she did realise that, did she instruct—
Why did Fergusons accept the order and then only in the last few days say that it could not complete it? Why did Fergusons take the order if there were all those problems?
It appears to me that Fergusons was confident that there was sufficient design capacity in Europe to come up with the design—
We should not let Fergusons off the hook here.
I am not letting anybody off the hook here, but I think that there are other people responsible. Fergusons consulted Harland and Wolff and BAE Systems at Govan, which recently had 60 people working on roll-on-roll-off ferries who are presumably not doing that now, and two Norwegian yards and one Finnish yard. No one in Europe could be found to do the design. Did the Minister for Transport realise that there was a shortage of design capacity? Did she instruct those who were placing the contract to speed up the process?
My final question was, where are the ships being built? Now I know the answer and it is a matter of deep regret.
In Caithness, we rely on our transport links, whether road, rail, air or sea. I want to put on record my thanks to the Minister for Transport for her work on this matter. I know how hard she and her team have been working to put all this together. It is about new ships and new facilities and that will mean that a lot of good can be done. The Minister for Transport mentioned lower fares, improved sailings and so on. Those will mean a considerable boost for the economy of Caithness, Orkney and Shetland and will lead to the concept of the islands as a string of pearls. Many people—including Andy Kerr—will come to visit us in future on the splendid new service.
The Minister for Transport mentioned delays, as other members have. Some delays have been beneficial. I understand the move to 1 October which, at least, took the change to the service out of the tourist season. However, people in Scrabster and other places are increasingly concerned about delays. There is an impression, particularly in respect of decisions that must be taken in the next few days, that those issues are not being addressed as quickly as they should be. That is not the minister's fault.
It would be helpful if the minister could use her good offices to bring pressure to bear on NorthLink to address certain questions, such as the deal with Scrabster harbour. My point is simple—this will be a great achievement, and I am very grateful for it, but it would be a pity to lessen that achievement merely for the want of the niceties of administration. I know that the minister is a busy lady, but if she could bring that pressure to bear, that would represent a belt-and-braces approach to the completion of something of which she will one day be very proud.
I, too, welcome the debate. It is helpful to have had the debate at short notice—it shows that the Parliament can react to current events. I am disappointed that Fergusons has pulled out of building one of the ships, but I am glad that that does not mean that there will be a delay to the service. I welcome the improvements in the service—the new vessels and the improved timetable.
I welcome especially the fact that the new vessels will be safer and will fit the purpose for which they were designed. However, I want to know whether the minister has ensured that the new ferries have good disabled access. The lack of disabled access has been a problem on many of the older ferries that serve the coast of Scotland. It is important that we ensure that any new ferries that are built have good disabled access.
The increased services will be welcomed, especially by the people of Orkney, who have a long journey up the A9 to get to Scrabster to catch the ferry. The increased services will mean that the people of Orkney can use that route with more confidence. However, will the minister ensure that there is integrated public transport? I have often heard people in Orkney complain that they sail into Scrabster harbour, only to see the bus leave. It is important to ensure that there is a dedicated ferry bus, which would encourage people to use public transport on that route.
I also welcome the lower fares. Will those fares be extended to haulage and tractors on the ferries? Many crofters and farmers in the northern isles have told me about the increased costs that they face for feedstuffs and transporting livestock. Lower fares would help them at a time when they are struggling to make ends meet.
I congratulate the minister on the consultation exercise that was carried out for the service. Many people in the northern isles appreciated that. I know that the people of Scrabster appreciated the minister's visit earlier this year.
I would like to comment on the P&O road haulage services between the northern isles. Although I understand that that does not fall within the minister's remit, I ask her to monitor the situation to ensure that those services are not affected.
I thank members for their co-operation during the debate.
The SNP appreciates the gravity and urgency of the situation. We are discussing vital services. We have never agreed with the use of the term "lifeline services". It appears to us that—irrespective of someone's geographic peripherality in Scotland—they are entitled to various rights as a citizen, including taking part in the social and economic fabric of society, which means that transport should be affordable and accessible. That is everybody's right and it is Parliament's duty to the people of Scotland to ensure that we achieve that.
We have had a good debate and several important points have been made, but I would like clarification from the minister on two further points of detail. I turn members' attention to schedule 2 of the agreements that are before Parliament. Clause 1.1(b) talks about an appropriate lessee as an organisation that "is sufficiently financially robust". Would the minister tell us whether NorthLink is viewed as being "sufficiently financially robust"? If not, who is to be the guarantor of the contract? Will it be the Royal Bank of Scotland? If—because NorthLink is insufficiently financially robust—the guarantor is to be the Royal Bank of Scotland, can the minister assure members that that is proper and correct?
The second matter relates to page 9 of schedule 1 of the agreement between the ministers and NorthLink Orkney and Shetland Ferries Ltd, which refers to "Return on Capital". That is the grant that is payable, which may be "retrospectively increased" in various circumstances. Is it the case that the return on capital was not mentioned in the invitation-to-tender documents? If so, is not that a fundamental change in circumstances that might have resulted in other bidders, such as Serco-Denholm or P&O Scottish Ferries, putting in different proposals and financial bids, had they known that there could be a variation in the return on capital?
Is the minister satisfied that full information was made available to all those who were interested in tendering? Did the information indicate that there was the possibility of variation and, indeed, an increase in the return on capital, with an increased grant, if the capital return was not met? If not, might we in due course face litigation from companies that were interested in tendering, but which are now disappointed and disaffected? That is a worry, because we wish the ferry service not only to be up and running, but to provide an improved service.
There are a number of detailed points to which I wish to respond in winding up. It is important that I clarify that the process has not been rushed through unfairly. It has taken nearly two years to get to this stage. I am aware that colleagues feel that the process has been lengthy, but the detailed specifications and the importance of the routes are such that it was important to get the new tendering process and the construction of the new boats right.
On Bruce Crawford's point about design capacity, ferry yards throughout Europe are applying for European intervention fund support. Hindsight is a wonderful thing, but with regard to those particular proposals, we have been able to get the third vessel secured by a yard that has appropriate design support.
It has been established that the problem with Fergusons is that it does not have the design capacity. Is it possible to use the good offices of CalMac to ensure that the steelwork capacity that is available at Fergusons is used, so that the required delivery time is met and the boats are put into service? Presumably, the design team in Finland will require a lead-in time, which could delay the delivery of the vessels.
The contracts will contain a detailed commitment on the timing and delivery of the new vessels. It is not possible to extend that time scale without invoking the other clauses in the undertaking that members have in front of them. The contract is being signed between the Executive and NorthLink—it is up to NorthLink to sign appropriate contracts to demonstrate that it can deliver on the contract, so that we do not have a direct relationship with Fergusons, Akers or any other shipyard.
We are aware that, prior to conferring preferred bidder status on 5 October, there was a great deal of discussion with relevant yards. Quotations had already been sought from different yards by NorthLink, to determine the different bids that were available. At that stage, Fergusons would have made a bid in good faith as a business proposition.
Time scales have been pressing, but all bidders were aware of that from the start. It is important that we meet the obligations of the international convention for the safety of life at sea, and the Stockholm requirements that were introduced after the tragedy of the sinking of the Estonia, so we cannot hang about. It is important that we get moving.
As Bruce Crawford rightly identified, we need to make sure that the Finnish Government secures its intervention support so that the two larger vessels receive that support to the full.
Bruce Crawford asked me about one matter in particular that I must respond to, which is the price of the tender and the level of subsidy. I reassure the chamber that there is considerable headroom between the price in the tender and the tender bid of the next tender. Therefore, there is no question of that being a problem.
Kenny MacAskill asks whether NorthLink is financially robust. Its plans have been thoroughly scrutinised by CalMac, the Royal Bank of Scotland and the financial arm of that bank, which is funding the new vessels. The Scottish interest is with CalMac. All parties are confident that NorthLink is financially robust.
Tavish Scott asked several questions, one of which covered training for operation of the vessels. We have time for training the new crews, and that issue will be studied when the implementation plan is produced, after the contracts have been signed.
The points that Tavish Scott and Jamie Stone made about harbours are extremely relevant. NorthLink has had detailed discussions with the relevant harbour authorities about access to harbour facilities and the dues that must be paid for those facilities. Some significant improvements will be required. Jamie Stone mentioned that, as did Tavish Scott.
Will the minister give way?
No, I am well on the way, and I am four and a half minutes into my speech.
Satisfactory agreements about the need to progress the work have been reached with the harbour authorities. I look forward to future applications and discussions. I am sure that there will be hardball discussions in the future. The Scottish Executive has told the relevant harbour authorities that it will consider applications for grant funding to part-fund necessary improvements. That commitment is important.
Rhoda Grant and Jamie Stone both mentioned the Scrabster Harbour Trust. An offer of £13.8 million in pier and harbour grant support has been made and accepted. The Executive will consider the need for additional capital consent for the Orkney Islands Council. Those matters will be dealt with at future dates, but the work is well in train.
Rhoda Grant asked about disabled access. I can assure the chamber that the design for the new vessels takes full account of that issue.
The contract will not subsidise freight. Extensive arrangements for freight are already in place, which were not brought about by the contract.
Kenny MacAskill suggested that substantial changes have been made that could have changed the nature of the tendering process, but I am not aware of any such changes.
I thank all members—their questions have been relevant. We look forward now to ensuring that the contract is signed and that the services come into play from 2002, when all those in the area will be able to benefit from the new vessels, the new fare arrangements and the new opportunities to maximise tourism, which Jamie Stone mentioned.