Parcel of rogues

Nearly three decades ago, Margaret Thatcher's government tried to give Western ferries a monopoly of car ferry services across the Clyde. Today an SNP government is going to succeed where Margaret Thatcher failed.

Four years ago the SNP won power with a single seat, and with help of a constituency seat that they won by a few hundred votes. That seat was Argyll and Bute and the promises made on ferry services (most notably Gourock-Dunoon) arguably helped clinch power for the SNP.

The government strategy here has been threefold. First assure the public that there were "suitable" vehicle carrying ferries available on the second hand market for the tender, second assure the public they were working actively with the European Commission on solving the complex legal issues here, third to delay as much as possible of this whole exercise until after the May elections to the Scottish Parliament, with contract extensions to the present operator if possible.

As I said a year ago tomorrow (19th February 2010) in a letter to the Dunoon Observer, "expect delays that will have the unfortunate effect of shunting as much of this process as is possible until after the Holyrood elections in May 2011, with probable extensions to the contracts of Jupiter and Ali Cat".

If that had worked, they may have succeeded in pulling the wool over the eyes of the electorate once more with false promises of hope. However, all three aspects of the attempted con unraveled. First, there were no "suitable" vehicle carrying ferries available on the second hand market as I was able to confirm with a series of Freedom of Information questions. Second, rather than being actively engaged in earnest dialogue and debate with the Commission, another set of FoI questions submitted by me showed that the total contact and communication between the Government and the Commission in this issue in the previous five months had been one e-mail in either direction. As I commented at the time, many people have more interaction with their dentist. The unraveling of the third stand of this con was confirmed today with the government's confirmation that: "Unfortunately, the Commission indicated last week that on the basis of present evidence they would not permit an extension (of contract) to address our real concerns".

To "real concerns" in that last sentence, I would just add "that we would be found out".

Here is what the government said in their statement as to what is happening now to the Dunoon Obsever today .

Government statement: "This involved, first, working to enable investment in new ferries for the route. This approach proved contrary to the European Union's Maritime Cabotage Regulation, which has the force of law".

Comment: absolutely untrue, there is absolutely nothing in the Regulation which prevented new ferries for vehicle carrying here, the subsidy would have been for foot passengers which are low revenue and high cost (mostly due to crewing levels which are imposed for safety reasons by the industry regulator). Adding an open deck for vehicles and a frequent service would add much more to revenues than it would to costs as ferry companies around the world and CalMac here in the Deloitte Touche report (and indeed Western Ferries itself) clearly demonstrated. This would have been entirely compliant with the EC law here because it would have reduced and even eliminated the subsidy. This would have complied with the instructions from the Commsion in 2007:

"for the purpose of applying Council Regulation 3577/92, the crossings between Gourock and Dunoon town centres and between McInroy's Point and Hunter's Quay can be considered as two separate routes and thus treated separately. In particular, the local authorities can impose public service obligations for the carriage of pedestrians on only one of these routes. Compensation may be provided for the public service obligations, subject to compliance with Community rules, in particular to the principle of non-discrimination laid down by Regulation 3577/92. Operators may use their vessels for the "pedestrian service" as well as for the "vehicle service", however any undue distortion of competition, particularly through cross subsidies between the public service activity and other activities should be avoided. As such, any subsidy for the public service activity cannot exceed what is necessary to cover all or part of the costs incurred in the discharge of the public service obligation, taking into account the relevant receipts and a reasonable profit for discharging those obligations". (Reply from Commission (provided by E-mail from Alyn Smith MEP's office September 2007) to a series of questions posed to the Commission by Alyn Smith March 2007 )

All the government had to do was to submit the abundance of evidence that a modern frequent vehicle-passenger service here would reduce the subsidy needed for foot passengers rather than increase it. But they refused to acknowledge any of this or say what evidence on this (if any) they did give to the Commission and so it must be presumed that their submission on these grounds was non-existent or weak.

Government statement: "Early on we discussed with a commercial operator the option of operating on the town centre to town centre route as well as on its existing route, with protection for the public interest. This was an offer that the operator was unable to accept".

Oh please, "a commercial operator" who can you mean? Apart from anything else, the Commission judgment on Gourock-Dunoon was not that it was illegal to run a vehicle carrying ferry service, rather the Commission judgment was that the government would have to publicly tender. So why were they having exclusive discussions with just one operator? I thought these lessons had been learnt when I found out and exposed through FoI the Users Charter meetings between the then Scottish Executive and Western 2004-05 which had the declared intention then of giving a monopoly of vehicle carrying to Western.

If the ferry operator in question here was Western, then there one question that a ten-year old child could have asked; why on earth would Western agree to run their services from the publicly owned piers where they would have to pay berthing chances, when they were now up to their eyes in their own linkspans which they could use for free? If that was what was being considered here, incompetence and naivety on the part of the government does not begin to describe this approach.

Government statement: "the Government approached the European Commission …. to explore alternatives. This included the possibility of the community creating a social enterprise which could bid and would keep control in the hands of the community. The Government was unable to confirm this at the time owing to the confidentiality of the process. No comment from the Government was possible given the intense commercial lobbying of the Scottish Government and the European Commission and the ever present threat of legal action from some quarters".

What a breathtaking and farcical attempt to try to oflload and shift governmental responsibility for this shambles. "Confidentiality" my foot, if you are going to have a "community enterprise" here, would it not be reasonable to ask the community first if there was any possibility of this? And how would it make any difference to the supposed difficulties the government was cooking up under EC law?

Any ferry company here will need four things (a) multimillion pound capital up front for at least two modern vessels (b) at least two modern vessel available for the route (c) a multi-million pound deep pocket to dissuade Western from folly of a ruinous price war (d) an organisation willing and able to bear these risks.

You have to tick all four boxes, which is where government comes in directly or indirectly with commissioning the vessels needed to begin with - which they should have done three-four years ago. Any "community-based organization" would fail on all four grounds. This is central government's responsibility and central government's failure, the danger is that some poor misguided individuals locally might think this is a solution and the government might think they could get some way off the hook by dividing local opinion through this. Cynicism and attempted manipulation of public opinion of the worst kind.

As for "the intense commercial lobbying of the Scottish Government and the European Commission and the ever present threat of legal action from some quarters", have you ever heard anything so weak and pathetic from any government? It is the responsibility of commercial firms to protect and promote the interests of their shareholders and lobbying is part of this, it is the responsibility of government to protect and promote the public interest and dealing with any lobbying is part of this process. As for "the ever present threat of legal action from some quarters", there has been an "ever present threat of legal action from some quarters" for at least three decades but as far as is known they have never actually carried out these threats. Bluff was actually called when the Commission investigated these ferry services, including Gourock-Dunoon, and found the only issue that concerned them here was the lack of a public tender. So there you are, if you have a commercial interest here, all you have to do is jump up and down and make lots of noise and the government caves in. As I said, weak and pathetic.

As for the three things which "the Government has done … which it hopes will address the community's concerns":

Government statement: "First, we have given greater flexibility to CalMac in terms of hours and frequency of operation on their existing Dunoon/Gourock service. Secondly, we will make available finance for the development of a local social enterprise company if the community wish to bring one forward quickly with the aim of enabling it to participate in the development of the route. And thirdly, the Government makes clear it is now examining the scope for the introduction of a statutory ferry regulator which could have strong powers to ensure there is no predatory commercial activity on any Scottish ferry route".

Who writes this rubbish for the Minister? If there are no suitable vessels being made available what difference will it make in term of "flexibility to CalMac in terms of hours and frequency of operation on their existing Dunoon/Gourock service"? The frequency restriction on CalMac to one vehicle carrying ferry an hour is like strangling someone for 30 years. Removing it now is like removing a tourniquet just before they expire. As for "we will make available finance for the development of a local social enterprise company if the community wish to bring one forward quickly with the aim of enabling it to participate in the development of the route" as discussed above this is the latest con and one which will be exposed as such. As for "the Government makes clear it is now examining the scope for the introduction of a statutory ferry regulator which could have strong powers to ensure there is no predatory commercial activity on any Scottish ferry route", I argued for this before the Transport Committee of the Scottish Parliament ten years ago 2001, just listen now to the sound of doors slamming after the horse has bolted.

The reality is that a Regulator would have made no difference and will make no difference without the use of other powers that EC law gives here. The crucial power is in the Maritime Cabotage Regulation and is called a PSO or Public Service Obligation. They can be imposed on island routes and certain estuary or peninsular routes which qualify to be treated as island routes - both the CalMac and Western ferry routes here qualify. The routes are public service routes under EC law and eligible for PSOs. What this means is that government can impose price caps and other obligations on these routes - and as the EC guidelines make clear these should be imposed by government, not through negotiation with the ferry companies involved.

It is usually thought that the PSOs are only imposed in cases where subsidy (what the EC calls "compensation") is involved but that is not the case, the legal provision for PSOs is separate from the case for subsidy (though it is usually - though not always - the case that subsidy requires PSOs). There are precedents for PSOs without subsidy on ferry services in the Mediterranean. What this means is that a PSO such as a price cap could be imposed in case of operators running without subsidy on routes such as Gourock-Dunoon. And as my blog on most expensive ferry confirms, there is already scope for reducing ferry fares here at the moment, even before the removal of the last vestige of competition.

So the tools exist under EC law to control for abuse of monopoly power here. Is the government willing and able to use such powers? No, indeed the recently departed transport minster in the present government made it clear in evidence to the Transport Committee of the Scottish Parliament that they had no intention of using PSOs on any ferry route in Scotland.

But it should also be borne in mind that local government are also part of this parcel here and have also been directly complicit and responsible for this debacle, do not believe the assurances that they are helpless observers. Western Ferries planning permissions for second linkspans at both their terminals were awarded by the respective councils on the assurance that they were "replacement" or "back up" linkspans, despite the fact that other ferry operators including CalMac manage quite well with single linkspans at the piers they use. Since the linkspans were built, planning restrictions or their use or retention have been quietly eased. Now just watch while the remaining restrictions on Western using the linkspans in the same working hour are removed to allow them to use them in alternating fashion on the basis of "congestion build up" and "overcrowding" at the terminals. The councils had and have their own powers to prevent this happening and voters and auditors might reasonably ask why they not only failed to prevent what is happening but actually facilitated it (special mention here is due to Dick Walsh, leader of Argyll and Bute Council who also proudly claimed credit for the tender and said he worked hard to make it happen. Well, if you want to take the credit, be prepared to take your share of the responsibility and blame).

So who will pay for this? The users and the dependent communities for sure, and if you think that if you want to sell a home or run a business here that no-one will be put off moving to Cowal when they see that the vehicular ferry traffic will be in the hands of a private monopoly, then think again. The managing director of Western has already made clear that there will still be the "road option". Welcome to Cowal and if you don not like what Western choose to offer or charge you, then just take the 84 mile detour by Rest-and-be Thankful or lump it. Tax payers national and local will also pay and have paid for this - the waste of the infrastructure at Dunoon breakwater, the direct cost of subsidising a grossly inefficient service, and the loss of berthing dues for the public linkspans that a proper ferry service would have brought in.

But do not be under any illusions that the effects here will be limited to some communities on either side of the Clyde, the eventual effects here promise to touch just about every community in Argyll and Bute. Once Western have secured their control of this major transport artery they will (as they have promised) turn their attentions to other routes in Argyll and Bute. One potential route they have declared interest in is the short distance between Port Bannatyne on Bute and Ardyne Point on Cowal on the mainland. A frequent shuttle service there (say with two vessels) would be a straight substitute for the CalMac Bute Colintraive ferry for most users and if the Colintraive ferry did not end immediately, it soon would on the basis that that it is subsidised and the Western operation would not be.

But that would just be the start. It would make commercial sense for Western to run a frequent ferry service here and later into the evening than the CalMac Wemyss Bay- Rothesay operation. For many Bute travelers to and from Inverclyde and Glasgow direction, using this route with Western's present route through Hunters Quay using Cowal as a land bridge would be a viable option. The frequency and late running would for many help compensate any disadvantage of length of combined travel compared to CalMac Wemyss Bay- Rothesay. It would make commercial sense for Western to do combined and frequent traveler tickets for the Ardyne and Hunters Quay operations.

This would lead to an erosion of traffic on CalMac Wemyss Bay- Rothesay. This would now very quickly bring us to the point where we have been in Cowal for years, but the resolution here would also happen much quicker. The situation CalMac Wemyss Bay- Rothesay would now parallel what happened on CalMac Gourock-Dunoon . Commercial logic would be for Western to lobby that CalMac Wemyss Bay- Rothesay was a subsdised operation competing unfairly against its own unsubsidised operation. The process may differ in some respects, but the end result is almost certainly going to be the same given the commercial logic and as long as we have weak and incompetent governance.

With two vessels Port Bannatye to Ardyne Western could carry all the traffic and replace all of the two existing CalMac ferry services to Bute. They might also have passengers bussed using a service like McGills as they do on their present operation. If Bute is "lucky", it might finish up with a passenger-only service from Wemyss Bay to Rothesay as the only alternative to Western, just as Gourock-Dunoon might be "lucky" to finish up with that now.

If Bute residents and businesses want to see what the future holds for them I suggest they visit Gourock-Dunoon after this June. As for the rest, again Western have made no secret of the fact that their ambitions do not stop at Bute, Arran is also actively on their list of interests and there is no reason why they should stop there. The most obvious places for their commercial model is where (like Gourock-Dunoon) they can target short crossings and high value segments of the market (like vehicles), leaving the taxpayer and public service operator to pick up the high cost foot passenger traffic linking with other forms of public transport (potentially the clear majority of Argyll and Bute ferry traffic)

The SNP won power four years ago in a very tight contest with Argyll and Bute effectively the tiebreaker with a few hundred votes difference. This election promises to be very close also and it would be ironic with a potential for poetic justice if ferries and Argyll and Bute again played a key pivotal role here. One thing for sure, no-one in Cowal will believe any assurances on ferries from this government, and once the word gets round the rest of Argyll and Bute over the next few weeks as to what this means here and what Western Ferries declared ambitions could mean for other lifeline island ferry services, then no-one in Argyll and Bute will believe the future of their islands are safe in this government's hands either.

Neil Kay 18th February 2011