Public Petitions Committee

Meeting date: Tuesday, September 6, 2011

Official Report 492KB pdf

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Current Petitions

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Essential Ferry Services (Governance) (PE1390)

The first current petition is PE1390, concerning the governance of essential ferry services. Members have the note by the clerk. For the record, in the past four years I have been involved in this issue. I have had communications on a number of occasions with Neil Kay and shared a platform with him at an event on this matter, on which I have also recently lodged a number of parliamentary questions.

I welcome Professor Neil Kay to the table and invite him to make a short presentation of around five minutes, after which we will move to questions.

Thank you for your invitation, which I appreciate. I will keep my presentation brief. My petition is about the appointment—which would be desirable—of an expert task force to advise Parliament and the Government on the regulatory oversight of ferry services in Scotland.

I have experience of this. I think that I first suggested it to a transport committee of the Parliament in 2000-01, to which I gave invited evidence. In the second session of Parliament, I again documented the failures of governance to another transport committee of the Parliament, and in the third session I again gave evidence to a transport committee of the Parliament, in which I repeated those failures in governance. On other occasions, I have advised parliamentarians and ministers that the appointment of such a task force would require only modest resources but could have a tremendous impact. I hope that this committee will at least give me credit for persistence, if not for success.

The purpose of my brief presentation is, I hope, to try to put the arguments in context. You have in the documentation evidence of why there have been successive failures in governance as far as ferry services are concerned. The petition is not about whether we should have public or private ferries; it is not about policy. However, to put it in context, I would like to mention two current areas of policy in which failures in governance can have a major impact on the public interest in Scotland. Both relate to cherry picking, or the dangers of cherry picking.

As an economist, I should say that cherry picking is not necessarily bad, but you have to have ways of governing it. You have to prevent it, to regulate it or to find ways of dealing with it, such as having competition among cherry pickers. The Government decided to deal with cherry picking by bundling routes. One policy development in the northern isles, which might be followed in the area where CalMac Ferries Ltd operates, relates to single-route tendering, which again raises the issue of potential cherry picking.

Cherry picking in the context of ferry services is not about routes but about particular services on routes, especially the high-value services such as ferrying vehicles and freight. The evidence in Scotland is that single-route tendering has not delivered—there is quite a bit of evidence of that. It has failed to deliver in the cases of the Campbeltown-Ballycastle and Gourock-Dunoon routes, it was resisted by three quarters of the respondents to the consultation exercise on the northern isles routes, and there is no economic case for it. If there were, we would see ScotRail services being tendered route by route. So, single-route tendering causes issues that have to be addressed by the governance structure. It has to be said that at the moment, the governance structure is not set up to deal with that and will fail to deliver. Parliament should be aware of that.

The second policy issue that I want to raise, which relates to governance issues or potential failures of governance, is the road-equivalent tariff, which members might know has been piloted in the Western Isles. Crudely put, it involves setting much lower fares than have previously been set by the CalMac ferry service—roughly half the level of fares that prevailed before. The pilot that is currently running was due to finish before, or just after, the previous election. It has again been extended and is due to finish next year. At the moment, there is pressure for decisions to be made as to whether RET is to be extended to the rest of the network. If you read The Herald last week, you would have seen that pressure is coming largely from commercial enterprises, whose interests are in making sure that RET is not extended to the rest of the network because it would, at a stroke, remove all possibility of cherry picking because it would be impossible to undercut the RET fares.

Whether to allow cherry picking, and which policy decisions to enact, are issues for Parliament and the Government. However, the present governance structures are not really set up to deal with the issues. I hope that, in tandem with policy that is in train just now, Parliament can set up a task force to give advice on the options and the dangers that may be involved in these policy issues.

The northern isles tender will go out next year, and the CalMac tender will go out soon after. There is therefore a window of opportunity during which the Parliament will, I hope, do what has not been done in previous years, which is take from people with experience of regulatory oversight of other essential services expert advice on how to deal with the options that are before Parliament and the Government.

I thank Professor Kay for his presentation and for keeping within time. I will ask a couple of questions before I invite my colleagues to come in.

A possible solution to some of the problems that you have raised is, of course, to have a regulator. I think that you have said in evidence that we have to be careful, because there is no point in having a referee if we do not know what the rules are. Would you say a little more about the development of a regulator? Alex Neil gave a positive answer to a question of mine about having a regulator, but I would welcome your thoughts.

In the documentation that the committee has before it, I raise a number of issues that could be considered. The answer to the question of what the role and responsibility of a regulator should be can be gained from other regulated industries. Other essential services have dealt with the problems of operator of last resort, of exclusivity, of cherry picking, and so on. They are not unusual problems; they are standard problems. Therefore, the agenda that a regulator would face, and the issues that a task force would attend to, are really the issues that have appeared time and again in other regulated essential services. For example, exclusivity—the issue of whether there should be just one operator on a route, or whether free entry should be allowed—has raised its head time and again, but it has never been properly solved.

Over the previous three sessions, the preoccupation of Parliament has been with the European Commission. However, the European Commission has narrow interests in such areas. It is interested in non-discriminatory tendering, in open access to other EU operators, and in there being no overcompensation. However, issues such as operators of last resort are left for national authorities to deal with. Such missing areas, which other essential services have dealt with, should be fully on the Parliament’s agenda.

In my experience, it is very easy to blame Europe, when sometimes the problems are more internal. I would welcome your views on whether public service obligations and public service contracts can be used. They have been used in vital air services, but little used in vital ferry services.

The answer to that is straightforward. An analogy that I have used before is that public service obligations and public service contracts are like a knife and fork: you might use a knife independently of a fork, or you might use a fork independently of a knife, but sometimes you might wish to use them together. So it is with public service obligations and public service contracts: sometimes it is sufficient to have a public service obligation without a contract, and sometimes you might wish to have a contract without a public service obligation. The Commission’s investigation was sparked when the possibility of state aid to CalMac and the northern isles ferry services came in. Sometimes, when you have public service contracts, you have to have clearly defined public service obligations as well. Sometimes they are alternatives, but sometimes they are complementary.

Good afternoon, Professor Kay. I am not familiar with the petition, so my questions will come from a layperson’s background. The petition is on the governance of essential ferry services, and in your introduction you mentioned policy issues, the road equivalent tariff and that type of thing. You have also commented on a ferry regulator and public service contracts, and best value and other issues have been considered. Who would sit on an expert group considering such issues? The reply from the minister says that a comprehensive field of experts, ferry operators, local councils and so on are looking at the issue and that that is the best way to go forward. Who would be on the group that you propose?

You say that you are in favour of a ferry regulator, but you would not like it alone to have the power to regulate. You also mentioned Europe, although the issue would involve Westminster, and I noted your comments about Westminster and putting the cart before the horse. The paper that we have seen and the minister’s reply state that there is a group considering the matter, and it is all-encompassing and taking advice from everyone. The Government is sympathetic to the idea of a ferry regulator and will have the final say on that so, in your eyes, why will that not work?

15:30

Essentially, the evidence on that is documented in the petition. During the past 10 or 11 years, I and others have tried to advise on the issues that are documented in the petition on which there have been genuine failures. Indeed, as I have said in my response to it, I do not feel that Transport Scotland’s response to the petition was adequate or dealt with the issues. That is part of the answer.

We are talking about skills and competences here, and we are dealing with what is effectively the only distinctively Scottish service that is essential and major. If we think of other essential services such as gas, electricity, water—which is a special case—and rail, they all have UK dimensions and the experience in how to regulate them and the problems that have been dealt with have been embodied at UK level. One of the things that I said in 2000-01 was that there was an abundance of expertise in the Department for Transport and Industry and other UK agencies on how to regulate for the particular issues—cherry picking, exclusivity, bundling of routes, operator of last resort—that are so important in practice.

I will give two more examples of that, if I may. I raised the question of a regulator in 2000-01, and the attitude to the suggestion was that we already had a regulator in the Maritime and Coastguard Agency, but that is a safety regulator. There was no real understanding of the notion of an economic regulator because such issues were dealt with at UK level.

The other matter is operator of last resort. Over three parliamentary sessions, I and others have tried to communicate how important it is to have an operator of last resort if we have competitive tendering. That is a standard solution in every other essential service. If the operator goes bankrupt or fails on technical or financial grounds, the service has to have a backup. That issue was on the agenda for at least the first two sessions of Parliament but it has disappeared now. There are genuine problems with the suggestion, but it has just been brushed under the carpet. It is important for such genuinely important issues to be put on the agenda and dealt with by people who know how to deal with them. Those who know how to deal with such issues are those from other regulated essential services.

I know that other members want to come in, but I have a tiny follow-up question. Your submissions mention how, on numerous occasions, you and others have “tried to advise”. Can you tell me how you have done that?

Well, there were the three invitations to appear before the various transport committees, and there have been numerous letters to ministers and to parliamentarians. We have made repeated efforts over the years. Would you like me to mention my “Newsnight Scotland” appearances?

I must have missed those, but never mind. I know that other members have questions, but I might come back with more later.

Professor Kay, your reply to the Scottish Government’s response to the petition mentions the independent expert group. Who do you envisage should sit on that independent expert group? You have clearly indicated that you do not expect such a group to make the final decisions. You have told the committee that you gave evidence in sessions 1, 2 and 3. You said to my colleague Sandra White that you have had numerous appearances on “Newsnight Scotland”.

They were not “numerous”.

I thought that you suggested that the appearances were numerous.

The clear question is how the independent expert group would influence the Scottish Government or the Parliament, when you seem to say that you have failed to influence the Government’s decisions since 1999.

I hope that the group’s existence and its members’ credibility, which would be critical, would give proposals momentum and credibility. Ultimately, that would benefit not just the public and the Parliament but the Government.

In the ferries review, the transport directorate has heard the voices of vested interests. I read the consultant’s report. Having been a consultant, I will say that consultants’ reports are good—there is no problem with them. However, consultants respond to terms of reference, and the answers depend on the questions that are asked. In this case, Transport Scotland has determined the questions. In terms of reference for consultants, questions are not being set about known soft and vulnerable areas. In the ferries review, the vested interests have their own agendas. We need an authoritative task force with credibility. The group that is appointed should reflect credibility and expertise in the areas that I have described. I hope that that would create a voice with the influence that others—such as me—have not had over the years.

You talked about “an authoritative task force”. Would that be the same body as your independent expert group?

Yes.

I return to my earlier question: who would be members of the independent expert group or authoritative task force? An expert group or task force can make recommendations, but whoever is in power and whoever makes the decisions can sideline them.

You kept on referring to vested interests and to a Government agency—Transport Scotland. Do you assert that Transport Scotland has been overly influenced by vested-interest groups?

We need to be clear about how we progress the debate as a committee and as individual members. I could read into what you say—although you might not be implying it—the idea that the vested-interest groups have unduly influenced decisions that Transport Scotland makes or recommendations to ministers.

That is exactly what I imply. In case it is being suggested that purely private interests are unduly influencing matters, I add that CalMac—or the David MacBrayne Ltd holding company—and NorthLink Ferries Ltd have vested interests. If several voices have particular agendas, making a coherent story can be difficult. The responsibility of the task force or expert group—the terms are synonymous; I have used the same phrases at different times—would be to advise and give an overview from its expertise, which is missing at the moment.

It is nice to meet you—I have read much about you.

As an engineer, I am interested in the issue from a business and an engineering point of view. I know that vessels are to be ordered in the relatively near future—in shipbuilding terms—and I am concerned about matching that up. Would the expert group be involved in decisions about vessels, designs and sourcing? Ships can last 25 or 30 years—or longer, hopefully. I would like to see such vessels, but that is a side issue. If we had a regulator, how would the lengths of contracts match the lifetimes of vessels? We cannot just dispense with a vessel after 10 years.

In the past few days, I have been in discussions with an operator who said that going for a six-year contract on their particular route would not be on. CalMac used to plan for a 20-year lifespan for its vessels, but some of its vessels are now well over 30 years old. A role therefore arises for a public body such as Caledonian Maritime Assets Ltd, which can consider long-term investments that private operators would not. Under European Commission law, it is quite legitimate to build vessels for a route and then to lease them to operators under competitive tender. That leads to a separation of the long timeframes that are required for building capital assets from the relatively short timeframes for contracts, such as those of six years.

This goes outside my petition, but the six-year time horizon has been heavily criticised by many people. It is not long enough to allow a sensible contractual basis. However, one way of dealing with that is to have CMAL—a state-owned company—building vessels under EC law, and under competitive tendering itself, and then leasing the vessels on the routes for which they were designed.

Possible options for how the committee will deal with the petition are laid out in the note by the clerk.

Would Professor Kay like to be on that committee?

No. Absolutely not.

Do members have any suggestions on what we should do with the petition?

I think that we should refer it to the Infrastructure and Capital Investment Committee.

As members will know, that committee is responsible for transport matters. Do members agree with the recommendation?

Members indicated agreement.

Professor Kay, we will refer the petition to the Infrastructure and Capital Investment Committee, under rule 15.6.2, for further consideration under that committee’s remit. Thank you again for coming along today, making a presentation, and answering our questions.

Thank you for your time and consideration.

15:42 Meeting suspended.

15:43 On resuming—

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Social Rented Housing (Standards) (PE1189)

Petition PE1189 is on standards in social rented housing. It is the second current petition to come under our consideration today. Members have a note from the clerk on the petition, in paper PPC/S4/11/3/6. In the previous session of Parliament, John Wilson visited Govanhill with our predecessor committee.

The petition came before the Public Petitions Committee during the previous session, and a couple of committee members took the opportunity to visit Govanhill. We saw at first hand some of the conditions that were being experienced by residents, tenants and others. Before the election, committee members wondered whether the Scottish Government would be able to get the legislation through in time to allow it to be enacted and have the impact that we wanted to see in Govanhill. The legislation did indeed go through before the election, and we now have reports before us on the actions that have been taken by the Scottish Government, Glasgow City Council and other agencies to try to tackle some of the worst effects in the area. The issues have not been resolved completely, but a number of agencies have made a commitment on paper to tackle the issues that were identified in the original petition.

The Scottish Government introduced legislation that will take account of the private rented sector. On that basis, I am happy to propose that we now close the petition and look forward to the issues that have been identified being resolved through an interagency and multi-agency approach to Govanhill. The petition was well thought out and it has seen some good conclusions in relation to the issues that it identified.

15:45

Thank you, Mr Wilson. The recommendation is that we close the petition for the reasons that have been identified. Does the committee agree?

Members indicated agreement.

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Fire (Scotland) Act 2005 (PE1254)

We come to petition PE1254, which seeks an amendment to section 1 of the Fire (Scotland) Act 2005. Members have the note by the clerk, which is paper PPC/S4/11/3/7. I invite contributions.

This was quite a worthwhile petition. I was not on the Public Petitions Committee at the time, but I know that the petition did throw up a couple of anomalies and there was an investigation into it. I think that the Scottish Government has undertaken to look at the issues raised as part of a wider consultation. With that in mind, I believe that the petition has achieved what it can and it should therefore be closed.

Is that agreed?

Members indicated agreement.

So, we agree to close the petition under rule 15.7. The reason is identified in Sandra White’s contribution: the Scottish Government has undertaken the actions called for.

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Dance (Schools and Colleges) (PE1322)

PE1322 is on dance teaching and coaching in schools and colleges. Members have the note by the clerk, which is paper PPC/S4/11/3/8. Again, I invite contributions.

The petition relates to a fairly famous dance school in the Glasgow area, which is at Knightswood—although there is residential accommodation elsewhere. There was an on-going problem with the cost for people to stay at and attend the Knightswood dance school, simply because Glasgow City Council was the only one that would pay for the residential accommodation. It appears that Glasgow City Council has confirmed that it is taking forward plans to build a new residential facility in partnership with the parents committee. The petition was very worthwhile and raised a lot of issues, but I think a number of them have been looked at. Suffice it to say that local government is not necessarily the remit of the Public Petitions Committee, although we do look at issues pertaining to local government. Things are moving on and people are working in partnership. I think that the petition can now be closed.

Is that recommendation agreed to?

Members indicated agreement.

We will close the petition under rule 15.7. Again, the reason for that was identified by Sandra White: the Scottish Government and Glasgow City Council have indicated that they are committed to ensuring the future viability of dance teaching and coaching.

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Wild Salmon and Sea Trout (Protection) (PE1336)

Petition PE1336 is on saving our west Highland wild salmon and sea trout. Members have a note by the clerk, which is paper PPC/S4/11/3/9. My view is that this is a worthwhile petition and that it is worth referring it to the Rural Affairs, Climate Change and Environment Committee. Is that agreed?

Members indicated agreement.

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Coastguard Stations (Closure) (PE1389)

Our final petition is PE1389, concerning the adverse impact of coastguard station closures. Members have a note by the clerk, which is paper PPC/S4/11/3/10. I have been involved in some of the debates about this issue. There is probably an argument for our asking the Scottish Government to respond to the UK Government’s consultation. I think that it is probably in the process of doing that, but if not, perhaps we could ask what work it is carrying out in advance of formulating a response.

I very much agree, convener.

I very much agree, because this is a very sad situation. It is not about saying, “Oh, it’s Scottish. We mustn’t touch it.” This is a really big issue relating to maritime policy and safety and so on. We should encourage—if that is the right word—our Government to push on and lobby the UK Government on it. It is a very big issue and we should pursue it.

I certainly agree. I know that there was talk of some coastguard stations being protected as part of the review, but some, particularly the Clyde station, are under threat. We should continue to lobby the UK Government on that important issue.

Do members agree that we should ask the Scottish Government to respond in the terms identified?

Members indicated agreement.

I thank members of the committee and members of the public for their attendance. The Official Report of this afternoon’s meeting should be available on Monday 12 September. The next meeting of this committee is scheduled for Tuesday 20 September.

Meeting closed at 15:50.