HC Deb 11 December 1973 vol 866 cc362-75

11.30 p.m.

The Under-Secretary of State for Development, Scottish Office (Mr. George Younger)

I beg to move, That the undertaking between the Secretary of State for Scotland and David MacBrayne Limited, a draft of which was laid before this House on 30th November, be approved. The reason for the draft undertaking with David MacBrayne Ltd. for which I seek approval tonight is that the existing agreement with MacBrayne's, by a strange coincidence, was approved by this House exactly 12 years ago, on 11th December 1961, and it was designed for circumstances quite different from those of today. At that time MacBrayne's was a company partly in private and partly in public ownership; at that time it operated shipping services, road haulage and bus services in and to the Western Isles and West Highlands.

The company with which it is now proposed to make an undertaking is a wholly owned subsidiary of Scotland's nationalised transport industry, the Scottish Transport Group. It is engaged solely in the provision of shipping services subsidised by the Secretary of State. The shipping services of the group which are not covered by this undertaking are fully commercial and are operated by a separate company, Caledonian MacBrayne Ltd., and pay their own way entirely. The services that we are discussing this evening are only those being subsidised; we are not discussing the majority of services in the Western Isles, which are operated by Caledonian MacBrayne and which pay their own way without subsidy.

The new undertaking is designed to meet other new circumstances also. On 18th April 1972 my right hon. Friend the Secretary of State set out in reply to a question by my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward Taylor) his policy for the modernisation and improvement of shipping services to the Scottish islands. The new undertaking aims to give effect to that policy as it applies to the services to those islands which, in general, are too small, or too remote, or too sparsely populated to have a service which can be expected to pay its own way. The policy stated that new arrangements would be introduced to provide for the improvement of services, and for capital grant and for revenue grant fixed in advance for individual loss-making services.

All the main services to the major islands are operated purely on a commercial basis. Those services to which the undertaking now in force applies and which it is intended should receive support from the Secretary of State under the new undertaking are the minor vehicle ferry service between Scalpay and Kyles of Scalpay in Harris; the services between Oban and Lismore; between Tobermory and Mingary; from Oban to Coll and Tiree; from Mallaig to the Small Isles; from Mallaig to Kyle of Lochalsh. Portree and Raasay: from Oban to Colonsay; the minor ferries to Iona and Eriskay and the cargo service from Glasgow to the Outer Isles and Stornoway. In addition, a temporary freight service to Gigha is subsidised under the undertaking.

It is the intention, as my right hon. Friend said last year, that those of the services which are "local and minor" should in time become the responsibility of the local authorities with the assistance of Government grant in approved cases under Section 34 of the Transport Act 1968. Under these arrangements, Inverness County Council intends to assume responsibility for Raasay to provide a new vehicle ferry service there, once the necessary procedures have been completed. Argyll County Council is taking similar action over Lismore and Gigha.

Government assistance to MacBrayne's services to the Western Isles goes back as far as 1928. Until now, the operating subsidy has been based on a retrospective calculation of the overall deficit incurred in operating the services. There was no provision for a capital grant for the subsidised services, and this led to the arrangement, since terminated, by which the Secretary of State built and owned ships which he chartered for operation by MacBrayne's.

Our review of shipping policy to the islands led us to the general conclusion that the overall deficit method of subsidy did not provide sufficient incentive for efficient operation and for innovation and modernisation. In particular, the existing undertaking had the following main disadvantages.

First, the grant arrangements, contrary to what was hoped when they were introduced, did not sufficiently encourage the company to improve its efficiency, because the services were lumped together and because at least half of any profit was liable to be "clawed back" by the Secretary of State, and at least half of any deficit could be recovered from the Secretary of State.

Secondly, the grant arrangements based upon the overall deficit did not enable an assessment to be made of the cost to the company of each approved service. This meant that the Secretary of State could not possibly know whether the expenditure on each route was receiving a proper return in service provided to the public.

Thirdly, the terms and conditions involved the Secretary of State in decisions on detailed operational matters.

Lastly, the grant was related to revenue losses and did not take adequate account of capital expenditure. The undertaking tended, therefore, not to give sufficient encouragement for the modernisation of services.

The new undertaking which we are discussing tonight provides: first, for advances to be made in respect of individually approved services rather than approved services in the aggregate; secondly, that the amount of the revenue grant payable in respect of any service is to be the deficit which it is estimated the company is likely to incur over a certain determined period in providing that service, irrespective of whether, in that period, the company actually makes a profit in doing so or incurs an even greater loss, and, lastly, capital grant available for providing or improving an approved facility, which could include either a vessel or a pier.

One change to which I should like to draw attention is that, whilst the new undertaking gives the Secretary of State fairly wide general powers in relation to the subsidised services, it relaxes some of the detailed controls which are in the undertaking now in force. In particular, the Secretary of State is no longer required to approve in detail changes in the charges made to users of the services. A general control will be exercised through discussion of the company's estimates and revenue and expenditure for the "eligible services" and through the fixing of the revenue grant.

In fixing the revenue grant the Secretary of State will have all the powers and information necessary to obviate any need for the company to raise its charges to a level which would have unacceptable social and economic effects on the residents in the communities served by these services. The aim, as the policy statement said, is that charges on the commercial and the subsidised services should be comparable on a per mile basis after adjustment for distance. The revenue shortfall on the subsidised services will be made up by the Government grant. There should be no apprehension about this change. The Secretary of State will still be able to influence charges in general, and I know that the Scottish Transport Group is very conscious of its public and social obligations. At the present time, of course, the Price and Pay Code is an additional restraint.

I have no need to go through the articles in detail, but I shall be glad to deal later with any particular points that hon. Members wish to raise.

In concluding, I would like to say only that I am sure that the new arrangements will provide a much more satisfactory basis than has existed hitherto for the operation of this comparatively small number of subsidised services. The amount of money that will be spent in 1974–75 is £580,000. This will provide a better basis for the taxpayer, for the Government, for the shipping company and for the people of the islands whom these services will serve.

I commend the undertaking to the House.

11.40 p.m.

Mr. Gavin Strang (Edinburgh, East)

I believe that the last time an undertaking under the Highlands and Islands Shipping Services Act 1960 was debated was in December 1964, when my right hon. Friend the Member for Kilmarnock (Mr. Ross) sought approval for a draft undertaking relating to the North of Scotland, Orkney and Shetland Shipping Company Limited.

A great deal has happened since then, as the Minister has pointed out. We have had the 1968 Transport Act, Section 34 of which enables local authorities to subsidise ferry services. We have had the May 1971 Gaskin Report, and, above all, the Secretary of State's own major review of shipping services and charges, to which the hon. Member referred. We should not lose sight of the fact that the most important changes which have taken place since then for the people in the Highlands and Islands are those affecting services, either because services have been withdrawn or because new ones have come into operation.

That brings me to the first of three brief points that I want to make. It may seem a simple platitude, but we should not forget that what matters are the services provided. When we get bogged down in talking about subsidies and what company structure there will be, we should not forget that the only thing which really matters to the local community is whether there is a service, whether it is of reasonable frequency and, above all, whether it is reliable and reasonably priced. Secondly, this draft undertaking is about subsidies. So often when we read the literature, when we look at the Scottish Transport Group's report and at almost anything to do with the subsidising of public transport we come across the idea that there is some virtue in commercial viability. I reject that totally.

In principle, I am in favour of the point of view taken consistently by the Highlands and Islands Development Board, referred to in its bulletin on Highland transport, monthly bulletin No. 4, when it was pointed out that in negotiations with the Government over several years the board had advocated a charging system that put the islands in the same position as distant mainland centres: that is, that sea links should be treated as trunk or principal roads and charges made in the same way.

I make the point to illustrate my belief that we should get rid of the idea that somehow building a road or providing a new harbour or facility is money well spent but there is something undesirable about providing an operating subsidy.

Thirdly, because of the immense importance and significance of oil finds around Scotland there has been, quite naturally, a rise in people's expectations. They expect the revenue which will come from oil to be reflected across the board. I am not referring to the specific issue whereby some developments—for example, the proposed development in Lewis—will lead to greater demand for shipping and air services and thus make them inherently more commercially viable. I am referring to the fact that this important economic activity is to take place and it should mean that the Government are prepared to make more revenue available for better services. It is not just a question of better services being provided to enable us to get the oil out. It is a question of the revenue being used to benefit islands such as Raasay and Berneray.

I turn specifically to the draft undertaking and confine myself to four questions upon it. The first relates to the overall subsidy towards David MacBrayne Limited. It is brought out clearly that David MacBrayne Limited is to be set up with a reduced subsidy, and that estimates of expenditure under the Act show that we are discussing a considerable reduction. The proposed figure for 1972–73 was £814,000. The reduced estimate for 1974–75 is £580,000. Can the hon. Gentleman explain what has led to this reduction? To what extent is it a withdrawal of services? To what extent is it a hiving off of local authorities and using the money from the 1968 Transport Act? I hope that the hon. Gentleman will tell us about the relative size of the capital and revenue grants envisaged under this expenditure in the next year.

My second specific point is that the draft undertaking makes it clear that David MacBrayne Limited will operate only "eligible" services, which is the same as saying services which will require support and which will not be making a profit. What does the hon. Gentleman envisage happening in the future if an eligible service becomes commercially viable? Will it simply be transferred to Caledonian MacBrayne Limited, or shall we have the spectacle of private operators being allowed to take over a service which has been made viable by the public purse, no doubt as a result of substantial investment encouraged by the capital grants?

I hope that the hon. Gentleman will be a little more forthcoming about the Secretary of State's reduced control over the charges. I understand the hon. Gentleman to say there will be a greater degree of flexibility for the operating company to modify charges. I like to think that the Government's overall objective will always be to keep down these charges. Does the hon. Gentleman envisage a situation in which, if there were fairly substantial increases in costs which the company could justify, it could raise these charges at fairly short notice?

It seems a little arbitrary to seek to achieve a situation where, as the hon. Gentleman said, the cost per mile in the subsidised services will be rather similar to the cost per mile in the commercially viable services. How does the hon. Gentleman justify that criterion, which is arbitrary and depends how Caledonian MacBrayne Limited and David MacBrayne Limited are set up?

My fourth point relates to the curious expression used in paragraph 13 of the draft undertaking. It says: Without the written consent of the Secretary of State, the Company shall not and the Group shall so exercise its control over the Company to ensure that the Company shall not, conduct any transaction (whether or not with the Group or with any of its other subsidiaries) otherwise than on arms length terms. The phrase "on arms length terms" is a curious one to appear in the draft undertaking. Perhaps the Minister can explain what it means and why it has not been possible to use a more specific way of describing this state of affairs.

The Opposition basically support the Government's new policy as outlined in the reply of April 1972. We naturally want more and better services and more money spent on them. We believe that this should happen because or North Sea oil. We support in principle the Government's emphasis on modernisation and capital improvement. The Government have made quite a thing, justifiably, of the question of encouraging roll-on roll-off vehicle ferries to charge on the basis of vehicle length irrespective of load. We support that in principle. Has it been achieved, or are the Government still at the stage of encouraging the operators to do it?

11.51 p.m.

Mr. Michael Noble (Argyll)

This is one of the rare occasions when we have a short time in which to debate something of vital importance to a great many of my constituents. My hon. Friend said with some confidence that the new scheme should lead to a more satisfactory basis. It could not conceivably lead to worse than the one we have at the moment.

In my 15 years as Member for Argyll, I have not had on any other subject such a flood of complaints as I have received about these services provided by the Scottish Transport Group, whether it be MacBrayne's or Caledonian MacBrayne's or a combination of the two. It used to be said about the game of shinty that if one could not hit the ball one hit the man, and if one could not hit ball or man one hit the referee. That is the sort of game MacBrayne's ships have been playing for the last 18 months. They have run into each other, into rocks and into piers. They have done everything a responsible shipping services should have been able to avoid.

This may cause some amusement to the House, but it has had a deplorable effect on the whole range of islands these ships serve. It may be due to bad management or to bad luck—that is not for me to decide. It is for the courts of inquiry and the proper procedures in the intervening period. Whether one happens to live on Mull, or Coll, or Tiree, or Colonsay, or Islay, or Gigha or elsewhere, one has had a thoroughly bad service for the last 18 months.

When I suggested to the chairman that it might not be a bad thing to hold a small lunch party in Oban, paying a few people's fares, not to explain why MacBrayne's has made such a total mess of things in the past—let him forget that if he could—but to try to give encouragement that it would try to do better in future, he sent me a letter of staggering complacency. He said that MacBrayne's had carried more passengers than ever before and had consulted admirably with the people before it broke down. This sort of thing is so lamentable that it makes one wish that we could debate it for several hours.

On the day the chairman said MacBrayne's had consulted everyone very well, one of my constituents wrote to tell me that it had not consulted him on something it should have done, and there were another two calls from Mull saying that, having promised to take cattle to the sale last Monday, MacBrayne's had, only on the previous Saturday, said that a vessel was not available and that the farmers must change the whole of their arrangements. MacBrayne's has behaved abominably, and I am certain that no system of the future could be less satisfactory than what we have had over the last 18 months.

It does not surprise me that the hon. Member for Edinburgh, East (Mr. Strang) says that he sees no virtue in viability. That has been a passionate belief of the Socialist Party for a very long time and, my goodness, when the Socialists come to power they prove it. But there is virtue in encouraging people to try to be viable. If one looks at what has been happening on the west coast of Scotland over the past few years, one sees that the ships which the MacBrayne's of the day, with the concurrence of the Secretary of State, have built are unlikely ever to produce a profit. That is what worries me a little.

When my hon. Friend the Under-Secretary said that the Secretary of State has abandoned his power of control of charges to existing areas I listened to the list which he read. In the existing areas, where the service is said to be viable, there is included—if I understood my hon. Friend correctly—both the Island of Islay and the Island of Mull. It is very interesting that the charges to Islay are enormously less than the charges to Mull, though the distance to Mull is much shorter and the service is just as important. The reason is quite simple. In the case of Islay, Western Ferries provides some competition, whereas in the case of Mull there is no competition. Therefore, the company is able to charge a great deal more for that service, to the great detriment of the people on Mull. They feel very strongly that they should not be charged a great deal more for a service than their fellows just a little further south. Naturally, they object very strongly.

If the Secretary of State is abandoning all direct control over this matter, may I be assured that a comparable service will be charged at the same amount per ton-mile, per passenger-mile or per car-mile, or whichever method is adopted? If not, undoubtedly MacBrayne or Caledonian-MacBrayne, or whatever name it may suffer under at the time, will use its commercial judgment very often not in the best interests of the islanders concerned.

In general, I welcome the scheme. I hope very much that the Scottish Transport Group, instead of patting itself on the back about the number of passengers carried, will go out, as most of us have to do, to the islands to which it is supposed to be giving a reliable and satisfactory service, talk to the people there and hear what they say. These people—not just individuals; the complaints come from Tobermory and from every main user, including the branches of the NFU—are sick of the expensive, incompetent and, frankly, lousy service they are receiving.

11.58 p.m.

Mr. Donald Stewart (Western Isles)

I wished to begin my speech by referring to the vessel "Clansman" and the Stomoway—Ullapool ferry, but I do not wish to be ruled out of order.

It is wrong to believe that in the Western Isles the community enjoys subsidised services and makes no contribution to the national Exchequer. In a good year, Harris tweed exports account for £5 million. According to a recent article in the Financial Times, the fishings in the Minch are equal in value to the British fleet's catch off Iceland. From my constituency, we send more students to universities per head of population than are sent by any other part of Britain. We are making a contribution, even in United Kingdom terms, to the Exchequer. We make no apology for the fact that some of the services to the Highlands and Islands have to be subsidised. Even in London, a very wealthy city, the Government, according to an answer given some months ago, heavily subsidise transport. The ferry at Woolwich is subsidised. The Government have paid for flyovers on the road to Heathrow and so on. We therefore make no apology that services to the islands are subsidised in certain cases.

I never thought that I would appear in the rôle as defence counsel for Cale- donian MacBrayne's, but I would not go so far in my condemnation as the right hon. Member for Argyll (Mr. Noble). However, we have many complaints against the company. The people of Barra are to use the vessel "Iona", which they regard as unsuitable. She is far too small, but would have been excellent on the Gourock-Dunoon run for which I understand she was designed. There are no cabins for overnight sailings, which would be acceptable if the vessel could be depended upon to sail every day. The weekly sailing of the cargo boat from Glasgow has been reduced to every 10 days, and even that schedule is not maintained.

To travel from Tarbert, Harris, to Loch Maddy a passenger has to cross the Minch twice and pay two fares in doing so. We accept that direct sailings are not possible on every occasion that the vessel leaves Tarbert but passengers should have to pay the fare only once. Then there are the appalling costs for various services. A farmer in my constituency bought about £130 of drain tiles for his farm. The transport took about two hours sailing from Uig in Skye to Tarbert, Harris. It cost more than £100. The company would not classify the goods as agricultural implements, though what a farmer would do with drain tiles other than use them on the land I do not know.

I cannot understand the implications of the decision that the new undertaking is for approved services rather than aggregate, so I shall keep my powder dry on that score and the Minister may hear from me at some future date. I agree with what the right hon. Gentleman said about consultation. That has been a sore point for generations in the Highlands and Islands. MacBrayne's makes changes in schedules and in charges and no one knows until about a week beforehand that they are to be imposed. Surely the Under-Secretary can influence the company to consult the local authorities at least to get their views on these proposed changes.

The Scottish Office should look at the Norwegian experience. In Norway, similar services, although not free, are regarded as part of the highway system, and the people in our areas are entitled to expect the application of that principle, as the Highlands and Islands Development Board has suggested. These services should not be required to be commercially viable. Other factors should be taken into account. This is an area to which the Government would be looking for the resources and finance to bail out what might be a bankrupt economy, and, therefore, we have a claim on the Government's finances to ensure that we have reasonable sea services. The services to the Western Isles should be efficient in operation and reasonable in cost. I welcome the draft undertaking.

12.5 a.m.

Mr. Younger

I am grateful for the general welcome for the new undertaking, and I hope that it will live up to the expectations which all hon. Members—even my right hon. Friend the Member for Argyll (Mr. Noble)—have expressed.

The hon. Member for Edinburgh, East (Mr. Strang) asked why the subsidy had been reduced, if it had been reduced, and what the situation would be about capital and revenue grants. The principle [...] for the reduction in the subsidy is the reduction in the cost of the conventional cargo service, which has been losing a great deal of money. This is connected with the comment made by the hon. Member for Western Isles (Mr. Donald Stewart) about the cargo service schedule being changed to once every 10 days. As he says, the service has not been able to keep to the schedule.

The roll-on/roll-off service is a desirable innovation. The previous pattern of cargo services had become uneconomic. Often the ships were taking only a small amount of cargo. It has been possible to save a considerable amount of money by rationalising these services.

In future, revenue grants will be based on the requirements for each service. We have no specific aim either to reduce or to increase the subsidy level. If the need is proved for a subsidy on a particular route, that subsidy will be provided, and there is no ceiling on it. We have no capital grants in mind at present. It will be for David MacBrayne Ltd. to discuss its need with us if and when it wishes to have capital grants.

The undertaking provides for payments to be made for research, but no capital grants are at present in payment. I was also asked what would happen if a subsidised service covered by the undertaking became viable in future. The intention is that it would move from the subsidy arrangements to ordinary commercial operation and the service would be transferred from David MacBrayne Ltd., which is the company that runs the subsidised services, to Caledonian MacBrayne, the company that runs the commercial services. There is no question of MacBrayne having exclusive rights over any route, or of excluding other operators which may wish to come in on a route.

Charges by footage instead of weight are being introduced on services as they go over to roll-on/roll-off operation. A good number of services will remain on the old tonnage basis, but we hope to move all services on to the footage basis as soon as a full roll-on/roll-off service is provided.

My right hon. Friend the Member for Argyll made several criticisms of the way in which the services affected his constituents. I well appreciate that he has a great many complaints from his constituents. He always raises them with me, and I always do my best, within the proper limits, to investigate them. On normal operational matters it is best to take up complaints directly with the Scottish Transport Group, and I am always prepared to give my right hon. Friend any help I can in that.

My right hon. Friend asked about charges. I give him the assurance for which he particularly asked in regard to the undertaking services. We shall still be able to exercise influence over the level of charges on these services, and it will be our general aim to see that they do not rise above the generality of charges on the other services.

I am sorry that my right hon. Friend is worried about the concern of some of his constituents about the provision of a boat to take livestock for the Christmas sale in Oban. I have some reasonably good news for him. I understand that the "Bute" called for the livestock in question yesterday. The sale took place successfully today, and 91 cattle and 553 sheep were shipped without any trouble. That may have been due to the fact that he raised the matter.

Mr. Noble

My hon. Friend probably does not realise that that was very much less than the number booked, because the "Bute" simply could not take the numbers.

Mr. Younger

I will certaintly take this matter up with the Scottish Transport Group, and I am grateful to my right hon. Friend for raising it. There was some difficulty about a certain vessel being available, but at least a vessel was provided.

The hon. Member for the Western Isles asked about consultation on schedules. I can tell him that next summer's timetables have been put to local authorities for comment before publication later this month.

The only other point on which I was asked to comment was raised by the hon. Member for Edinburgh, East. He asked about the words "at arms length" in paragraph 13 of the undertaking. These words are included in order to ensure that any commercial transactions between David MacBrayne Ltd. and Caledonian MacBrayne Ltd. are done on a fully commercial basis. For example, if David MacBrayne had to charter a ship from Caledonian MacBrayne because there had been a breakdown, it would be necessary, because of the subsidy operation, for it to be clearly seen that the charter was done on a commercial basis. That is the object of the words, which I hope will meet the need.

I am very glad that the House has welcomed this undertaking, and I hope that it will live up to its obligations.

Question put and agreed to.

Resolved. That the undertaking between the Secretary of State for Scotland and David MacBrayne Limited, a draft of which was laid before this House on 30th November, be approved.

    c375
  1. AGRICULTURE (BANK LOANS) 30 words
      2. c375
    1. ADJOURNMENT 13 words
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