Commision Decision

The Commission Decision of the Scottish ferry network was announced today. It basically finds that the operation of these services has been compatible with the operation of the Internal Market with the possible exception of Gourock-Dunoon for which a tender must be launched before end-2009. The Commission found that the public service obligations (PSOs) for the western and northern islands were legitimately defined which does seem strange given that the government and its predecessor had rejected the use of public service obligations in the first place. The Commission in its intention to investigate last year also expressed concern that it was not clear that PSOs had been properly defined here, and that the Altmark principles had not been clearly complied with, which was not surprising given that the government had also explicitly rejected Altmark as being of relevance in this context. However, there is no mention of Altmark in the Commission's judgment today. This still leaves the whole issue of failures in setting up properly constituted regulatory controls, including the vulnerability of the network to unregulated cherry pickers.

This does not mean that the government's policy here was justified and did not run very serious risks. In one sense the severity of the risks posed by the government's rejection of both PSOs and Altmark created a very serious dilemma for the Commission. Had the Commission found that PSOs were not properly constituted it would have meant that CalMac and/or CMAL (the owner of CalMac vessels) could have been seen as having been the recipients of millions of pounds of illegal state aid (subsidy) over many years, which would then have to be recovered by the government. This would have finished either or both as viable entities with no obvious alternatives available. This could have created a crisis for the maintenance of essential ferry services to vulnerable island communities, a crisis with uncertain outcomes that would have been widely seen as having been created by the Commission. In that context, finding that the government had indeed set properly constituted PSOs despite having explicitly rejected their use might seem rather Alice-in-Wonderlandish to most independent observers, but while it is difficult to make sense of it in terms of strict logic, it may make sense seen from other perspectives.

The most immediate implications now are for Gourock-Dunoon. The government has already stated that the winning bidder for CalMac's Gourock-Dunoon run would have to find their own boats. However, a document published earlier by the government's Transport Department on the "uniqueness of the Calmac fleet", stated there were no suitable boats available on the open market for most CalMac routes, and this included Gourock-Dunoon. The "bring your own boats" policy runs a very high risk of a creating an unregulated private sector (Western Ferries) monopoly of vehicle-carrying on this strategically critical route by default.

Neil Kay 28th October 2009