HC Deb 20 March 1963 vol 674 cc518-28

9.34 p.m.

The Under-Secretary of State for Scotland (Mr. R. Brooman-White)

I beg to move, That the Undertaking between the Secretary of State for Scotland and Messrs. Bremner and Company, Shipowners, a draft of which was laid before this House on 7th March. be approved. This draft Undertaking is a small measure from the financial point of view and follows very closely Undertakings that have been debated on earlier occasions, but, as I know that the right hon. Member for Orkney and Shetland (Mr. Grimond) will agree, it is a matter of considerable importance to the area concerned. It deals with the sea transport services to the south Isles of Orkney—Hoy, Hotta, Fara and Graemsay, which lie to the south and west of Scapa Flow. The services run between these islands to the mainland piers of Orkney. at Stromness and at Scapa.

The company which operates this service, Messrs. Bremner and Company of Stromness, is well-established and well-known in the islands. It is a small private company with two working partners. It has been operating there since before the war, and has been assisted by the Scottish Office since 1947 when a contribution was made under the Congested Districts (Scotland) Act powers to supplement the Post. Office mail contract. During 1957 things became rather difficult for the company when its old ship the "Orcadia" had to be scrapped and at the same time the naval base at Scapa closed down. This removed a considerable part of the company's revenue at a time when it faced considerable capital expenditure in providing a new vessel.

The service obviously had to continue. As this was before the Highlands and Islands Shipping Services Act, 1960. had been passed, arrangements were made for the Admiralty to charter to the company its motor fishing vessel "Hoy Head", and the Scottish Office agreed to meet the company's losses on this ship, using the powers of the Secretary of State under the Congested Districts (Scotland) Act, 1897.

This arrangement got over the immediate difficulties, but the "Hoy Head", after adaptation to carry passengers and freight, was suitable to carry only 36 passengers. This was adequate for most of the year but not for the summer tourist season. To cope with the summer increase and to provide a relief vessel during surveys it was decided that a second ship must be obtained. The Highlands and Islands Shipping Services Act was by then on the Statute Book and in 1961 the Secretary of State was able to acquire and charter to the company a second vessel, the "Watchful" which can carry 91 passengers and therefore, with the "Hoy Head" is adequate to cope with summer traffic. The Watchful" is not normally used in winter except when she replaces the "Hoy Head" while that ship is undergoing survey. It has also been found useful to use her for similar purposes in the North Isles of Orkney.

When the original arrangements were made with the company in 1957 it was thought that the cost to the Exchequer would be about £5,000 to £6,000, and so it was. Since 1961, however, finances have been more difficult. Wages and other costs have risen and have not been covered by increased charges. Moreover, the second vessel, the "Watchful", has added to the costs. Subsequently, the company's financial returns for 1961, unexpected repairs to the Hoy Head ", and a poor summer season for the "Watchful" in 1962, made it clear by the latter part of last year that payments in 1962–63 would have to be in the neighbourhood of £13,000.

New arrangements were obviously needed, and, rather than continuing to use the powers of the Congested Districts (Scotland) Act of 1897, it was obviously better to bring these arrangements into line with arrangements made for the other islands under the 1960 Highlands and Islands Shipping Services Act. As the House knows, however, Section 2 (3) of the 1960 Act provides that the Secretary of State cannot make advances totalling more than £10,000 in any one financial year to any person, except in accordance with an Undertaking, a draft of which has been laid before Parliament and approved by a Resolution of this House. That is what we are now asking the House to do.

This draft Undertaking brings the arrangements with Messrs. Bremner into line with the other agreements that have been concluded under the 1960 Act. It will enable the Secretary of State to meet the company's needs for assistance over £10,000 in the current financial year and, if necessary, in subsequent years. The Undertaking, of course, has been under discussion with the company since last year, and there have been negotiations. The Undertaking follows broadly the same lines as the agreements with David MacBrayne Limited and with the Orkney Islands Shipping Company Limited, which the House approved on 11th December, 1961. Therefore, perhaps I need not detain the House by saying very much about the detailed provisions since they repeat in effect what the House has already discussed and approved in the other agreements.

I shall not summarise the Clauses unless the House wishes me to do so, except to make a brief reference to Clause 12 which provides an incentive to efficiency. There is a variation here, not in the form but in the proportions. The arrangements are the same as for MacBraynes, but hon. Members will see from the Undertaking that if losses turn out to be higher or lower than estimated, the difference is to be shared between the company and the Secretary of State in the proportion of 25 per cent./75 per cent. If I remember correctly, the proportion in the case of MacBraynes is 50 per cent./50 per cent.

These proportions have been taken because obviously in a very small company like this a higher loss might be crippling. For the same reason, a maximum ceiling and floor is set at £1,000. Above this sum all losses are borne by the Secretary of State and all profits are taken by him. This looks complicated, but it amounts to this, that if the company does better than expected, it may earn up to an extra £250 and if it does not it stands to lose up to the same amount. If the company went on making extra losses or extra profits year after year, it would show that there was something wrong with the original estimates, and Clause 12 (2) provides that if similar results are shown in two consecutive years a recalculation shall be made in the grant.

I hope that what I have said gives a sufficiently clear account of this small measure to enable the House to approve it and to enable the Secretary of State to continue this new form of assistance which successive Governments have given to this company.

Mr. Archie Manuel (Central Ayrshire)

Regarding the proportion of 75 per cent. and the limit of £1,000 above which the loss is met by the Secretary of State, is there any ceiling limit over that sum of £1,000? Could it go to £3,000?

Mr. Brooman-White

As in the case of MacBraynes, any loss over a fixed figure, in this case £1,000, is borne by the Secretary of State and likewise any profit is taken by him.

9.42 p.m.

Mr. J. Grimond (Orkney and Shetland)

I thank the Under-Secretary of State for this draft Undertaking and also for the way in which he has introduced it.

My constituents are grateful for the help advanced to these services. As the Under-Secretary said, they are important in that they are the only means of transport for passengers and most freight up and down the Scapa Flow. They are, therefore, the equivalent of, and as importan: as, roads on the mainland.

In passing, to allay any fears of hon. Members, and possibly in particular of the hon. Member for Central Ayrshire (Mr. Manuel), this is a very limited operation. The figures in question are small and, I think, can be estimated with a fair degree of certainty.

Mr. Manuel

My fear was that there would not be the flexibility to run an adequate service if the limit was too close to £1,000.

Mr. Grimond

I appreciate what the hon. Gentleman says. I should, first of all, like to say that, grateful as we are for this help, it seems to me that the whole situation underlines once again the lack of any strategy, so to speak, for services in the Highlands or, indeed, Highland development. One of the troubles of these services is that the population in the area is falling and so is trade. One reason why we are having this draft Undertaking is that losses have increased owing to a rundown to some extent in trade in the area.

I am afraid that this is a situation which can be paralleled in many parts of the Highlands, and what we need is an overall policy to reverse this spiral of falling population and falling trade with the consequent need for more assistance to build them up.

This service consists of two vessels. As the hon. Gentleman said, one of these, the "Hoy Head", has passenger accommodation, but it is extremely limited because only about fifteen passengers can get under cover on the boat. Having made frequent trips in it, which I have much enjoyed, I cannot say that it is of transatlantic standards. In fact, there is close competition between the oil drums and the passengers on the deck. The other vessel is slow. I do not complain about this situation, but these vessels will not go on for ever, and, unless some general upthrust can be given to the area, we shall be in difficulties in future. There are also difficulties about piers. This is another common difficulty in Highland development. We may improve the services, but unless we have adequate piers we shall not meet the whole difficulty.

The service is run primarily by two partners, and, lest the House feels that they are being unduly generously treated, I should point out that they get a very small management fee—I think that the Under-Secretary of State will confirm that—and undertake a good deal of the work themselves. This is not an operation which is conducted by two wealthy men in striped trousers sitting in an office. They do their best to run the concern efficiently and to give service in conditions which are not always easy and with boats which are licensed only for work within the Flow or to and fro between the mainland of Orkney and the inner islands. There is a slight difficulty here, because the Under-Secretary of State mentioned the possibility of using these boats between some of the northern islands of Orkney, but they could be used only between Kirkwall and the nearer Northern Isles because I do not think the Board of Trade would permit them to go far out. They are therefore confined to this service, which handicaps their profitability.

I am grateful for what the Government have done. I hope that the time will come when they review the whole situation in the Highlands again, but meantime I hope that this will ensure that my constituents will be able to travel between the islands on their lawful purposes and to continue their trade.

9.47 p.m.

Mr. William Ross (Kilmarnock)

There was almost an air of abashment and shame about the Under-Secretary of State when, after hearing the large sums involved in the Estimates which we have just passed, he dealt with a matter which means life or death to the economy of a part of Scotland involving an annual cost of about £13,000. I remember the long debates we had on the Highlands and Islands Bill in the Scottish Committee and our determination to ensure that Parliament carried out its function of scrutinising expenditure. We wished to be sure not only about the wisdom of that expenditure but that the spirit of the Bill would be carried through.

I do not know whether the spirit of the Bill, now that it is an Act, is carried through. The right hon. Member for Orkney and Shetland (Mr. Grimond) has been a very considerable benefactor from it. He has been able on two occasions to indulge his occasional passion for nationalisation because the other company which links the Northern Isles is one of the instruments of the Secretary of State. I refer to the North Orkney company which replaced the steam navigation company, which is financed by the Secretary of State. We are here once again dealing with the right hon. Gentleman's constituency, but this time with the South Isles. I do not think that anyone would object to this. One appreciates the difficulties in this part of Scotland and that what the Government propose here is absolutely essential. I only regret that we do not always have a similar enlightened policy in other parts of Scotland. I would even think that the Liberal Party could have extended its occasional generosity in this connection when it voted for the Second Reading of the Transport Bill.

The Undertaking is an interesting one. It is not exactly the same as the MacBrayne one—far from it. There is a curious definition of how long it will run. Its term is five years from 1st April, 1962—the Under-Secretary got it in just in time to cover this year—and it is terminable with three months' notice on each side, either before or after the terminable date, strangely enough. It seems to be able to perpetuate itself beyond 31st March, 1967. I do not know whether this was one of the flaws in the Undertaking. There are some considerable flaws in it. I do not know whether we will get another apology from the Secretary of State before we have finished, but it is worth noticing that one or two things need to be explained.

The financial commitment appears to be the annual grant and, of course, the management fee, of which the right hon. Member for Orkney and Shetland has spoken. At one time, the figure was running at between £5,000 and £6,000; now it is going up to £13,000. Then there is the revaluation and allocation of any additional loss or unexpected surplus. We can ignore that one for the moment. The company is, however, liable to gain anything up to £250 or to lose anything up to a similar figure, but any loss over that sum, no matter how big, will be borne by the Secretary of State, who, equally, will derive the benefit of any greater surplus.

The approved capital expenditure, which is to be met by grant, is to cover the possibility of further chartering. I was surprised to hear the right hon. Member for Orkney and Shetland speak about the difficulties of one of the ships which was rather slow. My impression is that power already exists in the Undertaking for the Secretary of State to replace the ship by a better one if he sees fit. There is no need for a further undertaking or for the Government to seek further powers for that purpose.

In paragraph 12 (3), there is a financial commitment outside the other commitments in respect of the survey costs. Have the Government anything in mind in respect of this capital expenditure? I notice from the Estimates for next year that capital expenditure in respect of Highlands and Islands shipping is rising from about £450,000 to £1,100,000, although it is fair to state that the figure is as low as £450,000 because the Government failed to spend £212,000 on the replacement of ships. That is an interesting comment in view of the state of our shipbuilding industry. The Government were late in placing the orders. I wonder whether that figure includes any capital expenditure for this service. It may well be that the justified complaints of the right hon. Member for Orkney and Shetland could be met within this figure.

Considerable interference will be caused to the freedom of Bremner and Company, because the Secretary of State now has furl power over the approved services. Incidentally, I should like to know from the Under-Secretary what are the services outwith the approved services which are not covered. It appears from the Undertaking that if the company decided to alter or to add to its existing services, as apart from approved services, it must tell the Secretary of State, who, in the light of what the Company proposes to do, could decide to take those services within the approved services. The company is, therefore, carrying on other services quite apart from the approved services.

The company can introduce any additional service or alter any service without the written approval of the Secretary of State, but it requires the written authority of the Secretary of State to discontinue any service. If he decides that a new or additional service is required, then he can order it. Here is a wonderful field for Questions by the right hon. Gentleman the Member for Orkney and Shetland to ensure that his area is properly looked after, although at the present rate of progress he will have to wait a couple of months before he gets the Secretary of State's reply—and then he can depend on it that he will not get the Secretary of State: he will get an Under-Secretary.

There is freedom, I notice, to experiment with excursions and temporary services without giving prior notice to the Secretary of State so long as they do not last more. than six months—a wonderful dispensation from the Secretary of State's generosity.

Another point which I think important is one which was stressed at the time when the Bill went through, and that is that if this is to mean anything at all. then the Secretary of State has got to exercise his powers in respect of fares and rates, passenger fares and freight rates, in the spirit of the Act. There was an Amendment put down by my hon. Friend the Member for Hamilton (Mr. T. Fraser) and accepted by the Government so that under all these agreements any fares or freight rates would be fixed by three criteria, the general level of other transport charges—whatever that may mean in the light of the situation as we know it in the Orkneys—the amount of the grant, and thirdly the effect on the economy of the area.

I sincerely hope that it will be such within its limited scope as to do nothing to further the serious decline which has taken place both in trade and in population over the past years—since long before ten years ago—in Stromness which is in the centre of this area and which probably was as heavily populated as Kirkwall but has declined over the century, as also there are islands which have become more or less depopulated.

So I hope that the Secretary of State will interpret this Undertaking in the spirit Parliament intended. I hope he will use it properly, and use his authority, if necessary, to bring fares down and to encourage experiments with services to enable this to be done. I would think that in certain areas there is a case for no freight charges at all. I think Parliament had better face this, and I think it will face it, considering the kind of thing for which we have already voted money today. With all due respect, if we vote £350,000 for something which is culturally desirable but which is not, as this is, a matter of life and death for certain people, then when the matter is one of life and death we have got to give it at least the same financial priority, and the Secretary of State should not be afraid to face that.

There is one very important question I want to come to. What goes on in these islands, and what is related to this? We have got this strange and mysterious phrase appearing in this Undertaking: If the Contractors shall at any time during the continuance of this Undertaking after receiving not less than two weeks' notice in writing from the Secretary of State unreasonably refuse or neglect to maintain any of the Approved Societies … What are the approved societies doing in this? The Under-Secretary of State wil find those words on the last page of the agreement. How did the Secretary of State manage to get approved societies into this Undertaking related to approved services of Bremner and Sons? I do not know.

The Secretary of State does so many strange things and he has got so many strange powers—unknown to the hon. Member for Kidderminster (Sir G. Nabarro). He has got the power to own ships, he has the power to buy ships, he has power to build ships, power to run ships and power to charter ships. He is assuming strange powers and it would be interesting to know what these "societies" really are. If they are approved, then who approved them and what does it all mean?

I hope that we shall get an adequate explanation of this. We may even get an apology. I do know how this affects the validity of the Undertaking or whether or not a new Undertaking will be necessary. I have no doubt that the Secretary of State will tell us that this is another of his celebrated misprints. Be that as it may, someone in the Scottish Office should make it his business to ensure that this kind of error does not creep in. It could easily lead to misunderstanding.

I have one other, more specific matter to raise concerning another variation. This Undertaking in respect of David MacBrayne Ltd. and the Orkney Islands Shipping Company Ltd. contained a clause stating what would happen in the event of hostilities. Evidently we have decided in 1963 that there are not likely to be any hostilities because, it appears, the clause "In the event of hostilities" has disappeared. Such words appeared in the past, and I should like to know why they are not now inserted. It may be that the fact that the whole matter can be terminated at any time within three months enables the Government to dispense with such words.

On the whole, my hon. Friends and I welcome the Undertaking and the fact that it regularises something that is carried on rather fitfully. It is beneficial to the islands concerned and is of value to the inhabitants there, their trade and farming traffic, and is helpful to tourism. Although it could have been made even more helpful, we certainly will not vote against it tonight.

10.3 p.m.

Mr. Brooman-White

I would like to begin by referring to the last remarks of the hon. Member for Kilmarnock (Mr. Ross), about societies. I congratulate him on his proof readiing. I certainly would not have made a good proof reader, because I read this document with considerable care and did not spot that one. It is, as he said, a misprint for "services".

The right hon. Member for Orkney and Shetland (Mr. Grimond) asked about our general strategy, while the hon. Member for Kilmarnock asked about the dates and duration of the Agreement. It is of a relatively short duration, for five years, and we do not know if this pattern of service will be developed very far in the future. As can be seen—in view of changes or developments which might take place—there is the three months possibility of terminating the Agreement. The sort of thing one might consider is the Orkney Islands Shipping Company Ltd. experimenting with a hydrofoil. Such an innovation or improvement could be brought in with reasonable expedition.

The right hon. Member for Orkney and Shetland also mentioned piers. He will appreciate that substantial improvements have been agreed to for the Longhope Pier and it is hoped that work will start before long. About £34,000 is involved in this. Regarding the management fee, as the right hon. Member rightly surmised, that is not a very great sum, £1,000 and, in addition, one of the working partners will get a salary relating to certain stevedoring work which he takes on.

The hon. Member for Kilmarnock asked about replacements. This is covered by the 1960 Act and does not come within the Undertaking. The large increased sums he referred to in the Estimates relate mainly to the three ships building for MacBrayne's. We do not envisage anything very large on these services.

I do not think that there is any other major point. In general, the tone of the debate has been to welcome this very small agreement and an acceptance that it is flexible enough to take account of any improvements in the services that may become possible to meet the needs of this area.

Question put and agreed to.

Resolved, That the Undertaking between the Secretary of State for Scotland and Messrs. Bremner and Company, Shipowners, a draft of which was laid before this House on 7th March, be approved.

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