Freedom of Information (FoI) answer
on Operator of Last Resort (OLR) for Scottish ferry services I have received a reply here from the Scottish
government to my FoI request regarding the issue of Operator of Last Resort
(OLR) for Calmac's ferry services in the Clyde and Hebrides, the relevant
sections of the letter are reproduced here This note should be read in
conjunction with my July postings here and
here on the subject. My FoI question read:
The Government's response reads:
The letter is about par for the course here - at best it demonstrates
a blinkered and dismissive approach to issues that are crucial to the
public interest. As far as the response "In relation to the above
request I should explain there is no requirement to have an Operator of
Last Resort" is concerned, of course there is no requirement
because it was the Scottish Government itself who failed in ts duty to
protect the public interest by putting one in. The rest of the response is just waffle. If these "solutions"
were practical alternatives to providing an OLR, then the obvious question
is why have similar solutions not been adopted for other essential services
subject to competitive tendering where provision for rapid replacement
of a failed or failing operator may have to be made? The obvious answer
is that "careful management and monitoring of the operators' performance
and the resolution procedures within the contract" may not be
sufficient to deal with unexpected financial or technical operator failures
or opportunistic operators. There is no reason to believe that ferry services
are unique amongst essential services subject to competitive tendering
and/or privatization in being somehow immune from these dangers. An OLR is a standard safeguard for other formerly nationalized or public
sector essential services in the UK such as rail, water, gas and electricity
services. As I have explained on several occasions over the past few years,
including in invited evidence before the Scottish Parliament, If you do
not have an OLR then you run the risk of exposing those dependent on those
services and/or the taxpayer to unacceptable risks in the event of failure
or unacceptable behavior on the part of the incumbent operator running
the tender. The key is the word "competitive" in competitive tendering.
Under EC rules the lowest (subsidy) bid has to be accepted in the tender
process, and even though the Government might like its own public service
operator such as CalMac to win the tender every 6 years when it is re-opened
to bids, it cannot guarantee such an outcome without breaching EC rules.
And if you do not have an OLR then you face the dual threat of adverse
selection in the tender process and moral hazard once the tender is in
operation. As I have already discussed, not only could these failures
impose severe costs on users, communities and the taxpayer in the future,
they may already have imposed real costs on these fronts already. The closest UK parallel to Scottish ferry services are Scottish rail
services and indeed many such ferry services are designed to connect and
integrate with rail services at mainland ports. There is a well established
OLR in the case of rail at UK and Scottish level, but for every case that
can be made for a need for an OLR for rail there can be made an even greater
case for an OLR for Scottish ferry services. There are more likely to
be reasonable transport alternatives for specific rail services than there
are for particular ferry services, especially (but not only) islands where
the single regular transport link with the outside world may be the CalMac
ferry service. And while there are a number of operators of publicly franchised
rail services in the UK who could serve as alternative operators if called
upon to do so, it is more difficult to identify alternatives to CalMac
(or to be more precise, David MacBrayne, the holding company for CalMac
operating Clyde and Hebridean services and Northlink operating Northern
Isles services). The forced stranding of users and dependent communities with the current
breakdowns of CalMac's MV Clansman shows what can happen if a vessel
suddenly fails. The situation would be many times worse if an operator
suddenly fails and there is no immediately available substitute operator
in the form of an OLR for the CalMac network as whole. As discussed in
the earlier posts, this is not something that is likely to be arranged
in days or even weeks once the need arises. This is not an abstract possibility,
we have already seen rail franchise failure in the UK and I have already
documented how these issues affect and could affect both the CHFS and
Northern isles tenders. As I have also pointed out, there is also the question as to whether
the Scottish Parliament has been misled over this issue. The OLR issue
was the subject of much debate in the Scottish Parliament for several
years from 2001 to 2006. The debate was typically framed in terms of how
the OLR function would be delivered, not whether or not it was needed
- it was typically taken for granted (quite rightly) than an OLR function
was necessary. The last references I can find to this issue in the Scottish Parliament
or in terms of advice or information from the government was to the effect
that what was to become CMAL would either provide or arrange the necessary
OLR services for Clyde and Hebridean ferry services, for example in the
consultation documentation for what was to become the current 2007-13
CHFS contract. I can find no reference by the Scottish Government to any subsequent variation in this intention to provide or arrange an OLR, either to Parliament or the public until the response to my FoI request this week. If some years have been spent by responsible authorities saying that
the body that was to become CMAL would be responsible for providing or
arranging an OLR for CalMac's Clyde and Hebridean ferry services, then
it is understandable if Parliament and the public continued to believe
that this would be the case in the absence of official advice or information
to the contrary. Certainly there is no evidence that I can find of any
debate or discussion in the Scottish Parliament as to the news and the
implications that there is no OLR for such services, and that there are
no plans to appoint an OLR for such services. That is why there are reasonable
grounds for asking if Parliament and the public have been misled over
this issue. A simple first approach to this would be for members of the
Scottish Parliament's Transport Infrastructure and Climate Change Committee
to ask themselves (or, in turn, to be asked) what they thought the current
state of affairs on this issue was. It is hoped that MSPs will pursue this issue, not just to establish whether
or not information has been kept back from them that they should have
been given, but to pursue what are absolutely critical and urgent issues
affecting the public interest. Neil Kay 6th August 2010 |