Has Stewart Stevenson sealed the end if the CalMac network?

On the 15th of this month I raised the possibility that the Scottish Transport Minister Stewart Stevenson has effectively sealed the end of vehicle-carrying on the CalMac Gourock-Dunoon public service route and handed over control of this strategically crucial market to a private sector operator, with no regulations or Regulator in place to control prices and services for vehicle-carrying. In terms of transport, geography, and economic development , it is a bit like handing over the keys to the Forth Road Bridge to Stagecoach and walking away.

However, the broader issue is not just the implications for Gourock-Dunoon but for the CalMac network as a whole. This is demonstrated in a document on the "Uniqueness of the CalMac Fleet" that the Executive prepared in 2001 for the first CalMac tender. As it says, it was not originally intended to be published, but was in fact finally published in 2005. See especially paras 21 to 25.

On para 24 it says:

"This market situation has to be examined in conjunction with the particular features of the Caledonian MacBrayne vessels. These include, the requirement on some routes for "open decked" vessels in order that dangerous cargo may be carried, the shallow drafts required on nearly all of the routes, the capability of the slipway operated vessels and the requirement for the upper Clyde vessels to load and discharge over both the stern and side. This set of requirements and circumstances makes the probable total supply of alternative tonnage almost nil".

The government then argued there were no alternatives on the open market for the CalMac routes, the vessels had to be custom-designed and built. The "upper Clyde vessels" referred to here are for the Gourock-Dunoon and Wemyss Bay - Rothesay routes. The only thing different about Gourock-Dunoon since the document was written is the new Dunoon linkspan means it does not need side-loading vessels (which brings it more or less into line with most of the other CalMac routes). Everything else is the much the same physically.

Then in an article "Ferry tales “don’t hold water” in Dunoon Observer news archives for 2nd October, where a Government spokesman commented before reaffirming the (quote) "government’s commitment to a passenger and vehicle route between the two town centres":

“Wemyss Bay-Rothesay was not tendered separately but as part of the Clyde-Hebrides ‘bundle’ of routes. Dunoon-Gourock is not part of this bundle and has to be tendered separately as a stand-alone service. “Since there are many types of vessel that could potentially operate on this single route, it is not possible to persuasively argue for an exemption.”

"Many types of vessel that could potentially operate on this single route"? The problem they have walked into - whether blundered or deliberately - is that EC law here is about routes, not fleets, and bundling is something you may or may not do after you have attended to the routes in terms of PSOs and specificity of vessels.

If, despite the claims to the contrary made by the government in their document for the first CalMac tender there are "many types of vessel that could potentially operate on ...Gourock-Dunoon", then if the Commission's officials were just half-awake when this point was raised or agreed by the government, it raises an obvious question:

If the Government now says there are "many types of vessel that could potentially operate on Gourock-Dunoon", why does this not hold for the other CalMac routes as well?

The Government does not have to answer this question now, and the Commission does not have to ask them to answer. All the Commission has to do is say to the government is: you have not clearly specified PSOs for each route, you have not justified the building of vessels against clearly specified PSOs, consequently your bundling of the routes and building of vessels has been opaque and potentially anti-competitive. With these points in mind, complying with EC law here implies smaller tender bundles and the bidders must have the option of finding alternative vessels for a particular route (even if within a bundle) if they wish

Those are the genuine risks that this bungling has exposed these public services to. What would all this mean? It could mean that the Commission would allow the state-owned CMAL vessels to be made available, but would give bidders the option of finding their own vessels for each of the CalMac routes, they can then pic 'n' mix with CMAL vessels.

So if an operator could find, say, an old vessel with 6-years of life left in it that meets Islay route specifications for less than the, say, £2-3mill commercial leasing costs that the new £24mill Islay vessel would entail, they can take that instead. (remember you can subsidise operations with a PSO but not the leasing of the vessels). And CMAL would be left with a £24 mill asset on its hands, doing nothing.

No other vessel available for Islay this time? Well, bidders would still be able to pic 'n' mix CMAL vessels with any old vessels they can pick up, so they could finish up with a mix of CMAL and other vessels. CMAL could be left with an increasing stock of unused vessels on its hands - work out the economics, finance and politics of that. And then we have the issue of crews, forget TUPE, existing crews will be jettisoned one way or another, that is what the (private) business plan of potential bidders will be based on

Sooner or later (and this makes sooner more likely) the Gourock-Dunoon "solution" of bite-sized tenders and BYOB (bring-your-own-boats) will be applied to the other CalMac routes, if not this time, then next time. This would be break up and uncontrolled privatisation by attrition, not legislation.

Of course there is no guarantee that any of this will happen. The indictable thing is that, equally, there is no guarantee that it will not happen as a consequence of government action and inaction here.

I have argued for years that Gourock-Dunoon was a test case and potential template, not an aberration, set up by those with an agenda. We shall see in the future if I was right. In physical terms, Gourock-Dunoon is not an exception to the other CalMac routes, and Stewart Stevenson by treating it as such has walked right into the trap that interested parties have set him.

And as for any allegations that I am scare-mongering about the potential dangers that this pathetic charade and apology for responsible public service provision entails, then after my Commission Decision blog, contacts in Northern Ireland pointed out to that one CalMac route has already been put out to a private operator. You can read online about the government announcement, news of the subsequent probe and ongoing issues.

There is of course no suggestion that anyone has done anything wrong on that route. But with 25 other CalMac routes and Northern Isles thrown in for good measure, you can be sure that there are real opportunists watching and learning from all this and just waiting for the "disintegration, fragmentation, destabilisation and increased obsolescence of these essential services through an unholy alliance of cherrypickers, hired consultants, carpetbagging politicians and lobbyists, all this leavened with a rich assortment of fly-by-night operators" that I talked about in my Commission Decision blog.

The Minister Stewart Stevenson will be seen as the person responsible, both because of his statutory responsibilities, but also because while there are many hands at work here, he has been told clearly and repeatedly what is needed, from PSOs through Altmark to an independent Regulator, and has rejected them when there was a chance to reset the agenda. So yes, while his predecessors set much of this up, he has had an opportunity to review and reconsider, but has not budged on any of these issues. And, yes, he will and should bear ultimate responsibility for what is to happen here, for good or ill - though once you sieve out the inevitable Government spin I think it will be difficult to find much "good" out of what is soon to come.

Neil Kay October 6th-7th 2009