HC Deb 21 July 1981 vol 9 cc269-91 10.38 pm
The Secretary of State for Scotland (Mr. George Younger)

I beg to move, That the draft Undertaking between the Secretary of State for Scotland and Western Ferries (Argyll) Limited, which was laid before this House on 10 July, be approved.

As hon. Members will be aware, this Government came to office with a clear manifesto commitment to ensure the survival and prosperity of Scotland's island communities whose livelihood depends on the profitability of many small businesses. In this we recognised the importance of sea transport costs. We undertook to re-examine the structure of the subsidies and said that we were prepared to increase them in real terms as part of the process of moving closer to road equivalent tariffs. In pursuing that aim, we have mounted a large-scale consultation on the future form of ferry charges and of Government assistance generally. We have also—and this is of immediate practical importance—extended the area covered by assistance and the total amount of assistance being paid. The latter has now increased to around £9.5 million in the current financial year compared with the £4.3 million committed for 1979–80 by the Labour Government. Our extensions of assistance mean that more is now being paid out to help in real terms than before.

Substantial reductions in fares are now available on the main roll-on/roll-off services to Orkney and Shetland and on services taking most of the bulk of freight to and from the Scottish islands. Particularly during a period of severe public expenditure constraint, these steps have demonstrated a considerable commitment and have been warmly welcomed by the island communities. It is my intention to go a stage further by introducing extensions of assistance in the bulk shipping field through undertakings which will be considered by the House tomorrow. I also intend to make a statement on the results of the consultation on road equivalent tariffs before the Summer Recess.

It has, however, been clear to the Government that help should be given not only by increasing Government financial assistance but by ensuring that assistance is going to the most cost-effective services. The large subsidy being paid to Caledonian MacBrayne on the Gourock-Dunoon route—peaking at over £800,000 in 1980 and still forecast at £500,000 to cover a reduced 1981 service—came under early scrutiny when we were preparing our consultative paper on sea transport to the Scottish islands in March 1980.

In the paper we stated: It is intended that negotiations take place with Western Ferries and Caledonian MacBrayne with a view to creating a situation on the Gourock—Dunoon service where both companies set commercial rates with Government assistance giving them the same percentage reduction in these rates.

It has become clear that to subsidise two directly competing services would be financially wasteful and would restrict the amount of Government assistance available on other Scottish routes.

Accordingly, discussions with Western Ferries were held on the basis of their becoming sole operator. The undertaking before the House tonight is the result of those discussions. Its basic objective is to give a fair deal to the private operator, provide a satisfactory service and to release for use elsewhere Government assistance that is currently committed to this route. To ensure a satisfactory service, the Scottish Transport Users Consultative Committee will be considering the formal proposed withdrawal now submitted to it by Cal-Mac. The Committee's recommendations will be before me before a final decision is taken on the withdrawal of assistance.

There are several reasons for my proposed changes. Cal-Mac's deficit on the route reached £800,000 in 1980.

Dr. J. Dickson Mabon (Greenock and Port Glasgow)

The right hon. Gentleman is repeating what he said in a letter to me, namely, that losses were approximately £800,000 "on the route". Is it on the route or on the routes, because some people contest that £800,000 is spent only on the Gourock to Dunoon service?

Mr. Younger

That was the peak figure on that route. That occurred in 1980, and I am glad to say that the figure is now not that much. It is just over £500,000. It is still a substantial sum which we are anxious to see used to the best effect.

The loss is borne by the taxpayer and if it is used on that service it cannot be used to help services to the more remote island communities. The Government would be failing in their duty if they did not at least attempt to reduce such a level of assistance concentrated on one route. It is also clear that Western Ferries have, over the years, increased their share of the market in the face of heavily subsidised competition, to a point where they are carrying two-thirds of the total car traffic on the route and one-third of the passenger and commercial carryings—and that is without any subsidy and against a competitor which is subsidised to the extent of £500,000.

Western Ferries' present operations on the route have also been profitable, albeit marginally so, over the past few years. We believe that the success of a commercial operation on the service would be to the benefit of both users and taxpayers.

Mr. George Robertson (Hamilton)

The Secretary of State said that the ferries carry one-third of the passenger and commercial traffic. Will he break that down? How much is passenger traffic and how much commercial traffic? I do not believe that they are compatible. The difference between lorries and people is quite distinct and crucial.

Mr. Younger

I shall try to give the hon. Gentleman some idea of the figures, although there are a number of them. In 1980 the percentage share of passengers for Caledonian MacBrayne on the Gourock-Dunoon route was 66 per cent. and the share for Western Ferries was 34 per cent. For cars the figures were 36 per cent. for Caledonian MacBrayne and 64 per cent. for Western Ferries. I could give the hon. Gentleman the figures for other years. If he wants to ask any further questions, either my hon. Friend or I will try to answer them.

At present Western Ferries operates three vehicle ferries between its terminals at McInroy's Point, two miles south of Gourock, and Hunter's Quay, two miles North of Dunoon. This crossing is about half the distance of that operated by the Caledonian MacBrayne services. It is a low-cost operation. However, the withdrawal of the Caledonian MacBrayne facilities will put its existing capacity under some strain. The first major feature of the undertaking is therefore a capital grant for a new vessel. The undertaking would enable me to pay a capital grant to Western Ferries of up to £300,000 towards the cost of acquiring one roll-on/roll-off vessel for use in augmenting the vehicle ferry service between McInroy's Point and Hunter's Quay. This should allow all the vehicle traffic wishing to cross to be easily accommodated.

There is also a heavy, although steadily diminishing, passenger traffic between Gourock and Dunoon. To enable Western Ferries to carry this traffic, the undertaking provides that I may pay a revenue grant of up to £300,000 towards the costs incurred in the first year of operation of a passenger service by the high-speed catamaran "Highland Seabird". This would run between Gourock pier and Dunoon pier, and—for pedestrians—would be a direct replacement for the service now operated by Caledonian MacBrayne. The vessel "Highland Seabird" has accommodation for 160 passengers and can travel at a speed of 25 knots, thereby reducing the present journey time to about 12 minutes—half the present crossing time. The attractions of this service are obvious—[Interruption.]—even to the bon. Member for Dunbartonshire, East (Mr. Hogg).

In calculating the assistance to be paid, I will take into account the revenue that Western Ferries may receive for any other work undertaken by the vessel. The subsidy will not exceed £000,000, and there is no question of any further subsidy being required or paid in respect of any Western Ferries services after 30 September 1982. When compared with the heavy annual losses of Caledonian MacBrayne on the route, this represents a substantial saving in public expenditure which I anticipate could be achieved over a relatively short time.

I must also report to the House that in the negotiations with Western Ferries an agreement was reached on a further small measure of assistance, that is, 75 per cent. grant assistance towards pier improvements to accommodate the "Highland Seabird". These improvements are estimated to cost £20,000 gross. For technical reasons, they are not included in the undertaking, but it is right that I should inform the House about them now.

The Transport Users Consultative Committee for Scotland is bound by the Transport Acts of 1962 and 1968 to consider the proposed withdrawal of the Caledonian MacBrayne service. As I have already indicated, the Scottish Transport Group has given formal notice of such withdrawal. The committee may submit recommendations concerning the withdrawal to me for consideration. As I announced in reply to my hon. Friend the Member for Argyll (Mr. MacKay) on 30 June, it is my intention to consider the report of the committee before completing the undertaking with Western Ferries.

Mr. Norman Buchan (Renfrewshire, West)

Will the Secretary of State give some thought to the continuity of the service? For example, he might recall that the company has recently decided to pull out of the Islay service. Is that a good harbinger for the future?

Mr. Younger

I shall give thought to that. I have no doubt that that will be raised at the hearings before the Transport Users Consultative Committee. I should have thought that the hon. Gentleman would regard the Islay service change as helpful because it will enable the Caledonian MacBrayne service to act more profitably—or at least less unprofitably. It is to be welcomed from that point of view. The service will, I hope, be satisfactory in future.

We are determined to press on in a practical way with assistance to shipping services in the Highlands and Islands area. Not even our sternest critics will say that we have been remiss in providing substantial improvements for the islands communities in the last two years. The undertaking, with those that are to be debated tomorrow, represent the next steps in a process designed to give--and it does give—greater assistance to the islands. I commend the undertaking.

10.50 pm
Mr. Donald Dewar (Glasgow, Garscadden)

We regard the undertaking as a rather squalid little business. The Secretary of State gave the impression that some of the remarks in his brief were being read by him for the first time. His reading was a little less fluent than usual.

The proposals that we are asked to endorse have a great deal to do with politics and prejudice and little to do with a better service for the travelling public. The Labour Party's overriding consideration in this matter is which operator, over a period and with a reasonable guarantee of continuity, will provide the most efficient and effective link for those who wish to move between Gourock and Dunoon. Our basic contention is that the proposition that public money should go to Western Ferries and that, in effect, Caledonian MacBrayne should be removed from the service, will put the efficient service for commuters and holidaymakers at risk.

It is common ground that the Western Ferries operation is not entirely suitable for a sole operation. The route from McInroy's Point to Hunter's Quay might be attractive for cars and other vehicles, but it is not attractive to pedestrians. Both terminals are well away from the main centre of population. It would be a disaster if the only service was that between McInroy's Point and Hunter's Quay. There is implicit recognition of that.

Mr. Younger

The place involved is McInroy's Point, not, as the hon. Gentleman seemed to say, "McEnroses' Point"—that is something different.

Mr. Dewar

I am sorry that the right hon. Gentleman objects to my accent and pronunciation. He comes from a different part of the education system and perhaps he has difficulty in understanding those who have spent all their lives in Scotland. I say that without a blush.

There is implicit recognition of the unsatisfactory nature of the arrangements for pedestrians in the proposal that the catamaran "Highland Seabird" should ply direct between Gourock and Dunoon. The Western Ferries craft plying on the route at present would not be suitable for the piers at Gourock and Dunoon, even if the piers were adapted in the minor way proposed.

For pedestrians we are relying entirely on the "Highland Seabird". There must be a question mark over the reliability and suitablility of the arrangements. For a start, it is clear from the answer given to the hon. Member for Argyll (Mr. MacKay) on 30 June that there is a possibility in the mind of the right hon. Gentleman that the "Highland Seabird" service—the pedestrian service from Princes pier to Dunoon—may not turn out to be financially viable. Let me quote a key sentence: If for any reason Western Ferries is unable to continue the `Highland Seabird' service, pedestrians will be taken on a through bus between Gourock and Dunoon by way of McInroy's Point and Hunter's Quay."—[Official Report, 30 June 1981; Vol. 7, c. 336.] That is a very complacent attitude. It is a totally unacceptable proposition to anyone interested in the ferry and would be against the interests of those who use it. If the Secretary of State is genuinely positing as a possibility that the "Highland Seabird" may not be viable and may be withdrawn, the service provided by Western Ferries would be totally unacceptable.

On the advice that I have been able to get, there is every possibility that the "Highland Seabird" service will not be economic. At the end of the day it carries 160 passengers, but it is a new boat with high depreciation and fuel costs, and it carries a crew of six or seven. There is also the question of what happens if it is in need of repair. I am told that it has experienced unreliability, admittedly in the upper Clyde, in recent seasons. It is a thin-hulled craft, liable to accidents with flotsam. In any event, any boat will need overhaul and repair on occasion, and it is anything but clear what the back-up arrangements will be for the pedestrian service between Gourock and Dunoon.

My hon. Friend the Member for Renfrewshire, West (Mr. Buchan) referred to Western Ferries, and we should look at experience on the Islay run. Only a week ago, in a mean-mannered way, Western Ferries announced withdrawal from the area because it is not financially viable. To leave the company as a monopoly operator on the Gourock-Dunoon route would be dangerous and risky for a Government with the interests of the commuters and others using the ferry at heart.

I do not want to make this a witch hunt, but we are entitled to look at Western Ferries' record, as we can discover it, to decide whether it is likely to give the continuity and financially sound base that should be available from a company taking on these responsibilities. Of course, we have not seen the company's financial returns for the year to September 1980. They should be available in the next week, or two weeks at the latest, but—perhaps conveniently—they are not at present. However, in the year to September 1979, it made a loss of £371,000 on a turnover of under £900,000. In the year before that, it was a loss of £139,000. Even someone as unskilled in accountancy as myself can see that the company has considerable financial problems. Indeed, it is being kept afloat—if that is not an unfortunate metaphor—by a £400,000 term loan that will have to be repaid.

I was astonished to hear the Secretary of State suggest that Western Ferries was profitable. I do not believe that losses of that size can be accounted for by the Islay run alone. It is a clear and irrefutable deduction that it is making substantial losses on the Dunoon-Gourock run. [Interruption.] Both Ministers shake their heads, but I have seen quotations from Mr. Andrew Wilson in which he estimates the loss on the Islay run. It was less than half the company's annual loss. As, to the best of my knowledge, the company operates only those two and one other very minor run, it seems almost inevitable, unless it is counting large losses on "Highland Seabird", that the company is not on a sound financial footing.

I say on behalf of all my hon. Friends that it is a very doubtful principle indeed that a company that is withdrawing from the Islay run because it cannot make it financially viable, a company that is clearly making substantial trading losses and is heavily in debt, should be rescued—the Minister will hesitate to use that word—by public funds and be given a monopoly position on the route.

Mr. Younger

The hon. Gentleman is intentionally being unfair and misleading. On the Islay route Western Ferries has been competing against a vastly subsidised competitor, with no subsidy itself. On the Dunoon-Gourock route it has been doing the same, and has gained the lion's share of the market in most categories. The hon. Gentleman should have pointed that out. Western Ferries is doing extraordinarily well in being marginally profitable against a heavily subsidised competitor.

Mr. Dewar

The right hon. Gentleman may think that it is doing remarkably well in adverse circumstances, but I must look at the facts. If I am invited to consider the company as a long-term proposition to run public services, whether to make it a monopoly operator and whether its record inspires confidence, I am entitled to look at its balance sheet. Having done so, I remain wholly unconvinced. I am sceptical about the financial savings that may accrue to the public purse from the operation. The right hon. Gentleman was right to say that there was a peak loss to Caledonian MacBrayne of £800,000 on the route. This year the loss is down to £500,000. That represents some economies in ships and services. If the right hon. Gentleman thinks that there will be substantial savings, he may find that they turn out to be illusory.

Let us assume that one boat is taken out of service. If the "Juno" is sold and the "Jupiter" retained partly as a back-up boat for other Clyde services and for other reasons, the operating savings will be £628,000. Add to that savings on "Jupiter", which will not be in full service, of slightly under £90,000, and the fair estimates for savings on the shore terminal costs and administrative costs. That gives a total saving to Caledonian MacBrayne of £796,000. The route revenue was £803,000. On that basis there will be a small increase in the subsidy to Caledonian MacBrayne. The short-term and immediate costs—[Interruption.]—The Minister is shaking his head. I have gone into the matter carefully. I shall put forward a proposition that he can demolish, if he so wishes. The other one-off costs that will arise are also substantial. Sixty jobs will be lost, which will cost a considerable amount in redundancy payments. There will be a lay-up cost on the boat taken out of service of £30,000 or £40,000. There will be an unknown loss on the resale of the boat which was built in 1974. It will be difficult to sell as it is an estuarial design, built specifically for the route. It is not immediately attractive on the open market.

The Under-Secretary of State for Scotland (Mr. Malcolm Rifkind)

The hon. Gentleman appears to be suggesting that the savings for Caledonian MacBrayne through not operating the route will be less than the revenue that it currently receives from it. If that is so, it suggests that it is currently operating the route at a profit. That would not explain the subsidy of £800,000 last year or £500,000 this year.

Mr. Dewar

The hon. Gentleman is not showing his normal clarity of thought. I made a careful proviso that my figures were on the basis that one boat was taken out of service and sold. There will be substantial savings of up to £500,000 if both boats are sold. No doubt the Minister will then feel that he is justified. But the roll-on effect on services on other parts of the Clyde will be considerable.

The Wemyss Bay-Rothesay route is presently plied by "Saturn". She is the only craft on that route. It is important that there is back-up available, expecially during weekends and the peak summer holiday period, from the Gourock-Dunoon run. If both boats are sold to achieve the apparent savings that the Minister wants, there will be a substantial decrease in the efficiency of the service as well as lost revenue on the Wemyss Bay-Rothesay route.

There are other spin-offs. For example, the Dunoon pier will not be used to anything like the same extent. The only operator plying from it will be "Highland Seabird", and there will be a considerable loss of revenue to the Strathclyde regional council, to say nothing of the small entrepreneur who bravely took over the franchise of the shops and entertainment complex on the pier on the basis of the Caledonian MacBrayne service.

The unfortunate Caledonian MacBrayne will be left to run a Gourock pier that it will not be using. The spin-offs are considerable. If only one boat goes, the savings will be negative. If both boats go, there will be a sad depletion of service that will have an effect on other routes apart from Gourock and Dunoon.

We are told that the revenue grant may not be available if Western Ferries Ltd. gets the Coulport contract. That is a Ministry of Defence contract to carry personnel to the nuclear site at Coulport. There is cause for suspicion when the Minister says that if a contract is awarded in a certain way it will save him money in providing a subsidy. The inference to be drawn is that it is extremely likely that it will be set up to ensure that Western Ferries gets the contract. That adds to the smell that hangs over this doubtful transaction.

We are presented with a doubtful bargain for the consumer. There are uncertain savings. There are wider arguments about principle that are extremely important. The Minister said that there has been consultation. There was no consultation with the unions that represent the 60 men who are likely to lose their jobs. There was no consultation with local interests in Dunoon. They are protesting long and loud in the local press about the lack of consultation. The Minister is being over-complacent in suggesting that there was adequate consultation.

The right hon. Gentleman represents the party of competition. I can understand the attractions of that theory. However, we are being presented with the creation of a monopoly. I concede that the arrival of Western Ferries has brought a form of competition that, in the short term, has been perhaps beneficial to the consumer because there has been cut-pricing. For example, Caledonian MacBrayne has one class of car instead of three classes for small, medium and large cars. It has concentrated on one part of the lower fare scale. There have been a number of advantages of that sort. However, it is now proposed to hand over the route to one operator which is hard pressed for cash and which will be in a position in future to hold the consumer to ransom. It will have no alternative operator to worry about. If that is the result of the imaginative policy-making of the party of competition, we live in a sad and topsy turvy world.

We object to public money being used for the rescuing of a company. At a time when we are discussing the road equivalent tariff—if we are to have a statement in the House, I presume that it will not be made on a day when Scottish Members have left the House because of the approaching recess—there is an acceptance that market mechanisms cannot dictate ferry services in a market of this sort either on the Clyde or to the outer islands. I am not sure that it is right to aim for a commercial operation that makes a profit. If that is the measure of success, the consumer may well suffer at the end of the day.

When the Under-Secretary of State replies, I ask him to deal specifically with the Transport Users Consultative Committee's consultation. We know that it will be taken into account. May we have a firm undertaking that if the committee comes down against the change and says that Caledonian MacBrayne should remain on the route, we shall not have the undertaking implemented and the change forced through against local opinion and against the adivce of the committee?

The Secretary of State will remember that when he was Under-Secretary in the early 1970s exactly such a manouevre was suggested on the Islay routes. There was a suggestion that Western Ferries should get the subsidy for the Islay run, which it has just withdrawn. The TUCC came down against the move, and to be fair to the right hon. Member, when he was Under-Secretary he did nothing further. The matter was left in limbo and he did not implement. That is to his credit. All we want is a simple assurance now that if the same thing happens and the TUCC, representing the consumer, says that it is not in their interests, he will take the same line and the matter will die the death there and then.

I recognise that the Secretary of State has made great play with the traffic figures. I made a number of inquiries. In the constituency of the hon. Member for Argyll a number of people from Dunoon whom I had never met before took the trouble to 'phone me independently. I have been in contact with three councillors—none of them from the Labour Party—all of whom have expressed the deepest anxiety about the moves that are being made by the Government. Anyone who has read the account on Saturday 11 July in the Dunoon Observer and Argyllshire Standard of the meeting of the Dunoon community council, which was packed and at which people had to stand throughout the 2¼ hour proceedings, will see that it was said that: This meeting deplores the announcement without consultation by the Secretary of State. There is a great deal of evidence that there is local concern—and rightly so.

I do not like what is being proposed. It is unsafe in practice and in theory. I object strongly to such a rescue operation for a company which, at the end of the day, has been selling to Mexico boats 'which used to be on the Islay run and which has withdrawn the service from the Islay run. Only a few years ago, it was desperately trying to fell itself and trying to interest Caledonian MacBrayne in the possibility of buying it, lock stock and barrel. That is not a pedigree which inspires confidence. Such an important ferry route is not suitable for operation on the basis of private profit and should not be handed over to any private sector monopoly operator.

Caledonian MacBrayne is not above criticism. I accept that there are many reservations about its marketing and about the way in which it has provided the service.

However, at the end of the day it is publicly accountable, it guarantees continuity, has the right terminals and, overall, a wide tradition of service throughout the Highlands and Islands. It should not be betrayed, as proposed in the draft undertaking.

11.12 pm
Mr. John MacKay (Argyll)

As the Secretary of State and the hon. Member for Glasgow, Garscadden (Mr. Dewar) have said, this debate about Gourock and Dunoon cannot be taken in isolation from the shipping service on the West Coast. As the hon. Member for Garscadden has said more than once, the unfortunate decision by Western Ferries to remove itself from the Islay route has been brought on it by the totally unfair competition from subsidised Caledonian MacBrayne.

I appreciate that the hon. Member for Garscadden is new to the brief. I hope, if I can give him some advice, that he will read the transport research paper No. 6 entitled "The Future of Ferry Services in the Highlands and Islands" by the Highlands and Islands Development board, a body of which, I am sure, he normally approves.

Mr. Bruce Millan (Glasgow, Craigton)

My hon. Friend has already read it.

Mr. MacKay

If the hon. Member has read it, I notice that he did not quote from it. I am not surprised at that because the general pattern that that report wishes to aim at is much more akin to that which Western Ferries has brought to the West Coast than to the pattern Caledonian MacBrayne has brought.

Although the hon. Member for Garscadden made some cheap gibes and jeers about Western Ferries withdrawing from the Islay route, that is not the reaction of many of my constituents in Islay. I have received a letter written on behalf of two organisations—the National Farmers of Scotland Union in Islay and Islay Farmers Ltd., which is a major user of the transport service. The secretary of both organisations, Mr. George Graham, writes: The withdrawal of Western Ferries must not be allowed to happen…We at present benefit through the fact that Western Ferries are here. If they withdraw we suffer.

That is the genuine opinion of the farming and business community and the distilling industry in Islay. They are exremely fearful. Therefore, it will not do for the hon. Member for Garscadden to say that Western Ferries operates on an easily dispensable route. The right hon. Member for Western Isles (Mr. Stewart) and the hon. Member for Inverness (Mr. Johnston), who have constituency interests in West Coast shipping, will know that the advent of Western Ferries has had an interesting and useful result on the service run by Caledonian MacBrayne.

Mr. Buchan

Will the hon. Gentleman give way?

Mr. MacKay

I believe that the hon. Gentleman wishes to speak. If he interrupts me, obviously his chances of speaking will diminish.

The direct competition on both the Islay route and the Dunoon-Gourock route will cease from 1 October. That is unfortunate, but that is perhaps one of the inevitable results of the fact that on most of the West Coast there is not enough traffic for two competing operators.

That does not mean that we should not see how different operators can operate on different services. That is important. I do not believe that Caledonian MacBrayne at all times and in all places can provide the most imaginative and best service. It does a splendid job on many of the routes that it plies, and it should not be thought otherwise. Caledonian MacBrayne is an essential part of island life, especially on the small islands. As my right hon. Friend said, he has increased the subsidies very considerably, not only in line with inflation, but ahead of it. That has been deeply appreciated by my constituents and others.

The hon. Member for Garscadden has done a lot of research and knows a lot about this subject, but perhaps I can make him aware of several other interesting points. Historically, the West Coast was run by David MacBrayne Ltd. In 1968, the Labour Government's Transport Act brought into being two companies—Caledonian MacBrayne and David MacBrayne Ltd. That is not just history, because the important division was that David MacBrayne Ltd. was to run those services that could not be made profitable and always had to be run with Government help. By contrast, Caledonian MacBrayne had to run services on routes that could be profitable and would not need a subsidy.

It is interesting that the two routes about which we are talking—Gourock-Dunoon and Islay—were both given to Caledonian MacBrayne because both were supposed to be self-supporting. Yet last year, on the Dunoon-Gourock route, Caledonian MacBrayne managed to lose £800,000 on a turnover of £1,304,000. That is a pretty good way to lose money. The company also lost £400,000 on the Islay route last year—and that, on its own admission, before interest depreciation and reserve fleet costs.

In 1968, shipping on the West Coast was two-way. It was still largely the old steamers, but Caledonian MacBrayne introduced the hoist system for motor cars. That was an interesting but not the best method. Pressures for change were on their way, and in 1968—everyone should be fair about this—Western Ferries introduced a proper roll-on/roll-off system on the Islay route. Such was its success that it captured most of the traffic on the Islay route and it made a modest profit.

The people in Cowal saw these huge advantages and campaigned to have Western Ferries come to the Clyde. In 1975, Western Ferries went to the Clyde with its simple roll-on/roll-off terminals at Hunter's Quay, near Dunoon, and McInroy's Point on the Gourock shore.

Briefly, the difference between the two systems which operate on the Clyde is that Western Ferries has a proper roll-on/roll-off system. One drives on one end and at the other side one drives off the other end.

Mr. George Robertson

Will the hon. Gentleman give way?

Mr. MacKay

I am tempted not to, but I will.

Mr. Robertson

I am sure that the House is grateful for the hon. Gentleman's graphic technical description of a roll-on/roll-off ferry, but can he give any evidence for his astonishing assertion that the people of Cowal campaigned to get Western Ferries to operate between McInroy's Point and Gourock?

Mr. MacKay

If the hon. Gentleman checks with recent press reports, he will see a quotation from ex-provost John Thomson to the effect that people there campaigned to get Western Ferries to operate on the Clyde. That is my memory, too, and ex-provost Thomson agrees.

As the Opposition clearly do not like what I am saying, I should point out that paragraph 3.3 on page 7 of the Highlands and Islands Development Board transport document to which I referred states that some progress has been made towards concentration upon short, frequent routes which carry substantial traffic volumes and are operated with exemplary efficiency.…MacInroy's Point—Hunter's Quay ferries illustrate this approach".

The Highlands and Islands Development Board therefore agrees that it is operated with "exemplary efficiency".

I know that Opposition Members do not want me to go on for too long, nor do I wish to do so, but I want to make these points.

By 1976, on the Dunoon-Gourock route there was both a Western Ferries roll-on/roll-off service and a Caledonian MacBrayne service with a modified roll-on/roll-off system. That cannot be denied, because it is a side load at one end which requires manoeuvring on the boat and the use of turntables at certain times, although not to any great extent at the moment due to the limited amount of the traffic currently carried by Caledonian MacBrayne.

In 1968, there was to be no subsidy on Caledonian MacBrayne. Yet a subsidy was given. Indeed, one of the reasons why Western Ferries has had to come off Islay is that over the years since 1975 more than £2 million in operating cost subsidies alone has been given to Caledonian MacBrayne. Western Ferries said in 1975, as I am sure the right hon. Member for Glasgow, Craigton (Mr. Millan) remembers, that it could run the Islay service on that subsidy alone without charging any fares at all. Over the past few years, unfortunately, the pattern of Islay has been different from that on the Clyde. People have decided to use Caledonian MacBrayne, with the inevitable consequence that Caledonian MacBrayne will now he the sole operator.

On the Clyde, however, the pattern is different. There is no getting away from the simple fact that, for a variety of reasons, the motoring public in particular have voted with their wheels, if I may put it that way, to go by Western Ferries. In the last full year for which figures are available, 63 to 64 per cent. of the car traffic went by Western Ferries, leaving some 34 per cent. to go by Caledonian MacBrayne. This year the figures will be even more in favour of Western Ferries. To date, it looks like about 70 per cent. to Western Ferries and 30 per cent. to Caledonian MacBrayne. As my right hon. Friend said, while the balance is in favour of Caledonian MacBrayne, for reasons that I shall mention, even in passinger totals there is a one-third to two-thirds ratio, so a substantial minority of the passenger traffic actually goes by Caledonian MacBrayne. I must point out that both companies include as passengers the drivers and passengers of cars, which affects the figures a little, but it does not alter the total balance.

As I have said, the taxpayer spent more than £800,000 last year and an estimated figure of just under £500,000 this year. The hon. Member for Garscadden mentioned that one of the ways in which Caledonian MacBrayne has made the saving has been to reduce the sailing to one vessel only, which means that it is only once per hour.

The sailings have been halved, whereas Western Ferries has a much superior timetable, and always has had. It sails on the half-hour and on the hour. Caledonian MacBrayne now sails at, I think, 35 minutes past the hour, and it is the one and only sailing that it makes from Dunoon to the other side. Western Ferries also sails much later in the evening, up to 11.30 from Hunter's Quay to Gourock, and with a midnight ferry coming back at the weekends. During the week it has an hourly service in the evening at 7, 8, 9 and 10 pm. People can move back and forth across the firth in the evenings. That is a fact and cannot be gainsaid.

Caledonian MacBrayne's latest ferry departs from Dunoon at 20.35. Western Ferries provides a service far later in the evening, and especially at the weekends, up to 11.30 and midnight. That is important. It is used by a great many people. Indeed, I am sure that even the hon. Member for Hamilton (Mr. Robertson), when he visits his parents in Dunoon, may have recourse to Western Ferries if he wishes to get home late in the evening after his visit. Many people use the service in the evenings as well as during the day.

The Minister clarified one matter about the car ferry traffic. The balance is 70 per cent. to 30 per cent. The £300,000 is to enable Western Ferries to buy a 32-car boat in order to replace its 16-car boat. Perhaps the Minister will confirm that.

Western Ferries has been under a fair degree of attack about the service that it runs. It provides the emergency service across the firth. At 20-minutes call-out time it can be there to take an ambulance across the firth. Nobody else does it. Caledonian MacBrayne does not do it. Indeed, Western Ferries does it for nothing. Western Ferries, therefore, has won a significant proportion of the car traffic because of the level of service, because it is efficient, and because it has economic fares. It will, I believe, be economic to the taxpayer.

I should like to quote from a letter to the Secretary of State from the Dunoon and Cowal tourist organisation. It states: There is no question that since Western Ferries commenced the operation of a car-ferry link between Hunter's Quay (Dunoon) and MacInroy's Point (Gourock) a number of years ago, they have provided locals and visitors alike with a quite exceptional service. The manner of their operation and that of their staff is above reproach. On the vehicle side there are no worries.

I share some of the reservations of the hon. Member for Garscadden. [Interruption.] I am sorry that Labour Members are unhappy, but I have the principal constituency interest in this matter, and I feel that I ought to be allowed to make my speech. There were some Labour Members who had a party conference at Dunoon, got stranded on the other side, and have not been back since for their conference. I do not see why they should feel that they have a right to cut my time short. [Interruption.] If they do not interrupt me, I shall get on more quickly.

There are two small points to be made. One relates to the side door entrance to Dunoon at Hunter's Quay. It would be very much better if Western Ferries could land its cars at Dunoon. Unfortunately, the terminal at Dunoon has not been properly designed for roll-on roll-off. If Western Ferries thinks that it could be done efficiently. reasonably cheaply and easily, will the Minister, along with Strathclyde, consider the alterations that would be needed to make Dunoon the terminal instead of Hunter's Quay.

The other problem is that of passengers and of the "Highland Seabird". The proposal is that the "Highland Seabird" should run a basic hourly service well into the evening between the two piers. I can vouch for the comfort of the "Highland Seabird". It is much more comfortable to travel in than the "Juno" or the "Jupiter". The seating arrangements are much better. Some people have cast doubts on her reliability, but in the winter of 1977–78 she was on contract in Loch Kishorn, taking people nine miles in the Sound of Raasay to the platform being built for the Ninian field. She enjoyed 97.1 per cent. reliability in the Sound of Raasay out from Loch Kishorn. That cannot be said to be too bad. Her certification is of short international voyage class 2 type, which is superior to the Caledonian MacBrayne certification. Of course, if there is a heavy passenger demand for the route the vessel can go faster and do more crossings than a conventional boat, and that is important. I certainly hope that it will match the trade.

The main problem is the exposed nature of Dunoon pier, which is also a problem for Caledonian MacBrayne. The hon. Member for Garscadden did not mention that, but it is a major problem. Will my hon. Friend the Under-Secretary give me some indication of alterations that may be made at Dunoon pier to help the movement of passengers on to the "Highland Seabird"? That is the problem that worries me. On busy days like Cowal Games day there will be other boats on the firth such as the "Waverley" and the "Ivanhoe".

I am worried about the one-year limit on Government assistance. I am not in the least happy about the bussing option, other than in emergencies. I know that the Labour Party will not like this, but I cannot see why, if a private operator can run a service with a much lower subsidy than another concern, whether it be another private concern or a nationalised enterprise, he should not be given the route.

I want a guarantee that Caledonian MacBrayne will not be able to use cross-subsidisation to undercut Western Ferries in competition for the Coulport run. If there is fair and square competition for that service and Caledonian MacBrayne wins it, I shall accept that, albeit unhappily. My hon. Friend must take care to guarantee that there will be fair competition, that Caledonian MacBrayne will be unable to hide costs in its reserve fleet or in other West Coast runs and do down Western Ferries.

I hope that Western Ferries will realise that the public eye is on it, just as the public eye in Islay is on Caledonian MacBrayne to see whether, given a monopoly, Western Ferries on Dunoon-Gourock and Caledonian MacBrayne on Islay provide a reasonable, efficiently and economically run service from the point of view of the passengers who pay the fares and of the Government who have to pay the subsidy.

Labour Members should read the report from the Highlands and Islands Development Board. It outlines two points. One is about route licensing. If route licensing means anything, that is what my right hon. Friend is doing on the Clyde with Western Ferries. The second point concerns the nature that ferry operations on the West Coast should assume. There should be cheap and efficient frequent services, not an emphasis on the capacity of one particular service. In that way we can aim for the sort of service that we are always told the Norwegians provide much better than we do.

Several Hon. Members


Mr. Deputy Speaker (Mr. Ernest Armstrong)

Order. There are only 34 minutes of the debate left, and we have had only three speeches.

11.33 pm
Dr. J. Dickson Mabon (Greenock and Port Glasgow)

I take your point at once, Mr. Deputy Speaker. I have great admiration for the hon. Member for Argyll (Mr. MacKay) in his various manifestations, but he has tonight done himself a grave disservice by taking 20 minutes of a 90-minutes debate, even to defend what he regards as a vital constituency interest. We all have constituency interests. My hon. Friend the Member for Renfrewshire, West (Mr. Buchan) and my hon. Friends from the Highlands all want to make their points. It was unfair of the hon. Gentleman to have gone on for so long, particularly since the Minister has to reply to the cogent case advanced by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar). My hon. Friend destroyed any confidence any person—including the Secretary of State—could have had in believing that what the right hon. Gentleman is doing tonight is sensible.

First, the right hon. Gentleman has to look at the viability of Western Ferries. I very much question whether that company can survive. That is an opinion shared by many others. The company has been sustained over the years by certain individuals hoping that they can beat Caledonian MacBrayne at its own game. When we were setting up the Scottish Transport Group in 1968 we were asking eight or nine profitable bus companies to subsidise Highland steamers and services. That is what it basically came down to in banding together the buses and the boats. There were so many objections by the national busmen to that that for a time I thought that perhaps we were making a mistake.

I doubt whether economic services can be run to the islands and even whether, for example, a good service to Gourock and Dunoon can possibly make a profit. I follow the logic of the hon. Member for Argyll. If we take away Caledonian MacBrayne, why cannot Western Ferries make a healthy profit on its own so that it would make a reasonable return on its capital, which it is not now getting?

The Secretary of State is cheating. He is allowing this company a monopoly right—an extraordinary decision for any Minister to take. He is also—and it smacks of a quid quo pro—giving a monopoly right to Caledonian MacBrayne, which contradicts the whole concept of the 1960 Act, which we tried to operate faithfully and truly when we came into office in 1964. If Western Ferries did not do well in Islay, that is hardly the fault of either the Labour Government or the Conservative Government.

I remember the late Gilmour Leburn in 1963 telling us of the concept of the roll-on/roll-off ferries, saying that he thought there had basically to be free competition, that one company would ultimately survive the other, and that the then Government would not take sides.

Mr. Russell Johnston (Inverness)

Does not the whole Highland and Islands Development Board concept of route licensing presume a monopoly on a particular route?

Dr. Mahon

Yes, of course it does. But it also presumes a fairness by the operator to the consumer. That is my second worry. If Western Ferries gets this privileged position in Gourock-Dunoon, the rates will go bad. There is no reason why they should not. The attractiveness of Western Ferries in the McInroy's Point and Hunter's Quay journey, although it is a shorter distance—but that is not the attractiveness apparently—is that it is cheaper. It is nonsense to have a kind of postscript to a speech about all the many people in Cowal, and in Gourock, for that matter, who rely on that ferry for their livelihoods. Sixty or 70 workers are involved, but I do not mean them alone. They were not consulted.

It is a terrible charge against the Secretary of State that he has not consulted the unions or the local authorities, or the many, many people who are directly involved. He is getting a serious reaction in the different communities. If one does something to the Gourock-Dunoon run in relation to Caledonian MacBrayne, there are repercussions for Rothesay and Wemyss Bay and perhaps for elsewhere in the Highlands. Who knows?

Mr. John Maxton (Glasgow, Cathcart)

My right hon. Friend is quite right. Some of the boats are sometimes used from Gourock to Arran in bad weather in circumstances where they are making the long run from Brodick to Gourock.

Dr. Mahon

I agree. I would hate to think that in crossing from Gourock to Dunoon I had to rely on one boat, and in the winter, too. What would happen if that boat was in serious trouble and had to be in dock for some time? Is there another one to replace it? If so, where is it? What would be the situation if something happened to the boat on the Rothesay-Wemyss Bay run? How is that boat to be backed up? The same applies to the Brodick-Ardrossan run. This is all of a unity. It is not all of a disunity. To talk about there being this one line is a grave error.

I hope that the Secretary of State will get all the advice he can from the TUCC and that he will listen to it. It is fundamentally wrong for the Government to give a grant to this company to improve the pier and adjust its services—a pier which, incidentally, is still owned by its competitor and which is a charge on the taxpayer, and whose docking dues that company should pay. Those dues should be economic. But, no. The right hon. Gentleman will give the company £20,000 to change the pier in order to accommodate passengers. The passengers will not get off the train at Gourock, take a bus to McInroy's Point, get on a 12-minute ferry, get off at Hunter's Quay and take a bus to Duroon. That is nonsense. That is the first gift to Western Ferries.

There should be a declaration of interest. What is Western Ferries? Who are the directors? What sums do they pay to the Tory Party? Does something smack of political chicanery? Perhaps there is more to come. Perhaps this proposal is but bread upon the waters. It is not only money for the pier that is involved. We shall then help the company to buy a ship. After that we shall give a revenue grant. Paragraph 7 of the draft undertaking is curious. It states: In the event of the company obtaining a contract Where is the contract? Even the type of contract is specified. There are many contacts that might be obtained. The Minister implies that if the Ministry of Defence pays, he will take back the money that he guarantees in the draft undertaking.

This is one of the most disgraceful proposals ever to be debated in the House. I hope that it goes the way of the others that have been exposed to public ridicule. It is nonsense. My constituents and those of my neighbour, my hon. Friend the Member for Renfrewshire, will lose their jobs. It is not only the workers who will suffer, but those who have to travel to work, to school and to the hospitals. Indeed, Inverclyde Royal hospital is the hospital for the area. It is important to take such things into account. When the Minister, with his sharpened wits, tries to reply to the debate, I hope that he will not bind himself to the concept of the undertaking, whatever the TUCC says will stand. I wish the proposal ill.

11.42 pm
Mr. Norman Buchan (Renfrewshire, West)

I shall be brief as that will perhaps enable another hon. Member to speak. This proposal is an exercise in hypocrisy by the Conservative Party. The Government were quick to run to the Monopolies and Mergers Commission about the gas industry. It would be interesting if Western Ferries, which has been given a monopoly from Dunoon to Gourock, were taken to the Monopolies and Mergers Commission. The firm entered into competitive pricing against a public organisation that has run itself into trouble at Islay. It is no wonder that the double-headed secretary of the National Farmers Union of Scotland wished the situation to continue at Islay. The competitive pricing undertaken by the two companies was advantageous to it. However, two different companies on two different routes were being ruined. This is a nonsense.

We should be discussing the best public service. Despite all that has been said about Caledonian MacBrayne in the past, the people of both communities are saying that they prefer a monopoly that has public responsibility and accountability to a monopoly that does not. If the Minister does not take my word for that, he can take the word of the Glasgow Herald. It states: Though opinion in Cowal, like that in Islay, thinks Western Ferries have done a good job, few relish accepting its monopoly control of their main external link". At the very time that a handout is being given to run a monopoly, the company is withdrawing from a route that it used to establish its bona fides for the rout on the Clyde.

The removal of the service from Dunoon to Gourock by Caledonian MacBrayne will have immense repercussions. My hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) knows these waters well, He has described the effect on the Arran line, the Brodick. to Ardrossan route. Ardrossan is put rapidly out of action in bad weather. In that event, boats have to be re-routed to Gourock in my constituency. The length of the journey involves pulling off one of the two boats on the Dunoon-Gourock line to back up the Arran route. That will not happen if there is a monopoly with one boat.

There is hardly a single passenger crossing by the ferry who has not come by car. If that is granted by the hon. Member for Argyll (Mr. MacKay), it knocks a hell of a hole in his case. It is nonsense, as the hon. Gentleman knows. No one walks the length of the esplanade from Gourock station to McInroy's Point.

The cost of £300,000 to the Government and the community is met at the cost of 60 jobs. The average cost of making a man unemployed is £5,000. The cost of providing a subsidy to a private firm—and what a private firm—is £300,000. We would have liked the names My right hon. Friend the Member for Greenock and Port Glasgow (Dr. Mabon) and I know some of the names. They do not give us much comfort in looking to the future.

This is a captive position tied up with the contract under paragraph 3(7) of the undertaking in relation to Coulport. What is that all about? Is it a means of saying that a deal has already been done over the lucrative Coulport contract, that the Ministry of Defence will pay and that, in the meantime, public sector transport is clobbered? That is what is happening. It should stop. It is criminal. In some ways, paragraph 3(7) seems almost technically criminal, let alone metaphorically criminal.

I hope that the Government, even at this late stage, will relent and will drop their vicious antagonism to public sector operations. This is a piece of vicious politicking that has to be stopped. A hole has been blown in the thin-hulled vessel of the Government's policy. The proposal should be dropped now.

11.42 pm
Mr. George Robertson (Hamilton)

I shall try to emulate the example of my hon. Friends who have made brief contributions. I was brought up in Dunoon. My parents still live there. I have been a frequent user of both the Caledonian MacBrayne service and the Western Ferries service. I occupy, perhaps, a unique position in that I have been a passenger on a number of occasions on both services.

I can say from my local knowledge of the Dunoon area that feelings are running high on the issue. Even the hon. Member for Argyll (Mr. MacKay) who traipsed us around the technicalities or roll-on/roll-off ferries and the history of the division of the David MacBrayne company entered a number of caveats and reservations for his right hon. Friend the Secretary of State in the hope that the votes running away from him in the Dunoon and Cowal area might return in the expectation that the Secretary of State will build some of these reservations into his ultimate decision.

The greatest grievance felt by the people of Dunoon and Cowal is not necessarily confined to the undertaking and the circumstances surrounding it. It is the hasty manner in which the Government have chosen to ram the undertaking through the House before local organisations have had time to consider the implications for the community and give their views. I know that the Dunoon Commercial and Businessmen's Association has written to the hon. Member for Argyll expressing its concern and that it has received a prompt reply.

I believe also that the Dunoon and Cowal Tourist Association has written to the Secretary of State expressing its concern about the impact of the decision on tourism in the area. A graphic description in the Dunoon Observer and Argyllshire Standard shows the feelings aroused at a meeting of the Dunoon Community Council on the issue.

Various aspects have been mentioned by other hon. Members, but one of the crucial issue is that of passengers to and from Dunoon. As one who lived on the other side of the Firth of Clyde, I know how remote it can be. It is not an island, although the Secretary of State suggested that the Government's action was part of a policy for the islands of Scotland, but there is a remoteness that comes from being on the other side of a large stretch of water. Many people have used the ferry services across the Clyde daily in order to work in places as far away as Glasgow. No doubt a few—and fewer still in future—vote for the hon. Member for Argyll.

The magical figures produced to back up the Government's decision contain some interesting information. We were told by the Secretary of State that Western Ferries is making inroads in the crucial passenger traffic to and from Dunoon. We were told that it was taking 34 per cent. of the passenger traffic on the route.

On figures given to me by Caledonian MacBrayne, which carries an average of 15,000 passengers a week, I estimate that if Western Ferries is taking 34 per cent. of the total figure it must be carrying about 5,000 passengers a week. But it carries about 4,000 cars a week, and as every car must have at least one passenger, we are talking of total potential independent passenger traffic of only 1,000 a week. Given that the vast majority must be travelling by car and that the passenger accommodation on those ferries is so limited, it seems unlikely that they are carrying a significant number of passengers, even at present.

I said that I would be brief, so I will not go into the problems that the "Highland Seabird" service could cause. Even the hon. Member for Argyll admitted that serious problems were involved. I understand that when the ferry used Dunoon pier in the past, in the summer months, it managed to have two major accidents by crashing into the flotsam. That was in the placid calm summer months. What it would be like in the winter months can only be left to the imagination.

Perhaps this is the co-ordinated transport policy lead that the Government led us to expect in the general election campaign that they would put forward—choice eliminated, competition eliminated and monopoly private operators introduced on the route.

The hon. Member for Argyll said during one of the general elections in which he stood for Argyll: fares and freight charges must not be allowed to kill Argyll's economy. In another part of the same leaflet he said: The ineffectiveness of Tory opposition in Parliament shows how Liberal influence would be no less vital under a Tory Government than under Labour. There is a rich vein of humour there and no doubt I shall regale the House with it in future months, but there is an even richer vein in the leaflet with which the hon. Member managed to win his first election. As a Conservative candidate in 1979 he put forward another bright idea: A Scottish Development Fund, financed from oil revenue will be set up to pay for projects … Reception of all Television Channels throughout Argyll"— and, wait for it— subsidised commercial transport to the islands are two of the projects I will urge on this Fund. On the one hand we are told that there can be no call on public funds for essential routes and traffic in this part of Argyll, but the hon. Member for Argyll got himself elected to Parliament by promising that there would be widespread subsidies from oil revenues given to practically every other transport route.

The hon. Member tried two different parties and a lot of elections to get himself elected to Parliament. His right hon. and hon. Friends on the Government Front Bench seem to be doing their best to make sure that he goes back to Oban high school at the first opportunity after the next election.

11.55 pm
Mr. Russell Johnston (Inverness)

I shall be brief, as there is little time left, largely due to the speech of the hon. Member for Argyll (Mr. MacKay). I am a great admirer of many things about MacBrayne's, but I find it difficult to accept the view that has been extremely trenchantly expressed from the Labour Benches that there should never be a private operator on any of the ferry services.

Dr. Mabon

Never on a public subsidised service.

Mr. Johnston

All right, never on a public subsidy.

Mr. Buchan

How can one subsidise the public?

Mr. Johnston

I have only just started [Interruption.] I shall start again. I am not sufficiently knowledgeable to say whether the criticisms about the company, its financial viability and its profitability are well based. If they are well-founded, that is a serious matter. It would be foolish for the Government to make financial commitments to the extent proposed to a company that is not safe. I hope that clear answers will be given.

Everyone appears to be able to say precisely how much loss is made on the Gourock-Dunoon route, but no one will ever tell me how much profit or loss is made on the route between Kyle of Lochalsh and Skye, which is a publicly owned enterprise, on the ground that it is confidential commercial information.

Mr. Rifkind

That is correct.

Mr. Johnston

If it is confidential commercial information, why is no competitor operating? Why is not information about the route from Gourock to Dunoon commercially confidential? I fail to understand that.

I want to stress three issues that have been raised. The first concerns service withdrawal. What happens if a service once undertaken is withdrawn? What safeguards do the Government have? Other hon. Members have emphasised the back-up problem. It is extremely important. In my constituency experience, this summer the boat from Mallaig to Skye was taken off three times to go elsewhere. There is no back-up. That is a serious problem.

If the suspicions that have been voiced by the Opposition—I hope that they have been exaggerated—of the financial uncertainty of the company are fulfilled, what happens if it goes bankrupt? What will the Government do? What safeguards have they made in such circumstances?

11.59 pm
The Under-Secretary of State for Scotland (Mr. Malcolm Rifkind)

The hon. Member for Inverness (Mr. Johnston) has made a constructive contribution. I hope that I shall be able to reassure him

This is not simply an exercise in saving public expenditure. The purpose is to redirect a public subsidy from one aspect of ferry support, where in the Government's view it is not needed, to other areas where it would provide viable extra facilities to help to deal with the problems of the island communities. On the Gourock-Dunoon route Caledonian MacBrayne last year received a subsidy of £800,000 and this year a subsidy of £540,000 to provide a service in competition with Western Ferries, which, without any subsidy, has been taking an increasing share of the market over the past few years. That is nonsense at any time but especially when resources are scarce. With the money that will be saved by not having to subsidise an uncompetitive CalMac enterprise on this route, the Government hope to ensure that the funds saved will provide extra help for the island communities elsewhere in Scotland.

Mr. Maxton

Will the hon. Gentleman give way?

Mr. Rifkind

No, I shall not.

What I said a moment or two ago is not an empty statement. The hon. Member for Renfrewshire, West (Mr. Buchan) cannot deny that in the last couple of years, at a time when public expenditure generally has been reduced, the Government have doubled in real terms their help to the island communities. We have made it clear that we wish to give further help to the island communities. However, we do not conceal that that is difficult. We have to examine the best way of doing it.

We give a substantial subsidy—at least £500,000—through a company which, even with the subsidy, is losing traffic to an unsubsidised operator. That is a sensible area in which to find savings that can be used elsewhere. It would be grossly irresponsible if we did not.

The hon. Members for Glasgow, Garscadden (Mr. Dewar) and Renfrewshire, West, and my hon. Friend the Member for Argyll (Mr. MacKay) made reference to the Coulport contract referred to in the undertaking. The hon. Member for Garscadden and the right hon. Member for Greenock and Port Glasgow (Dr. Mabon) suggested that there was something sinister about that reference.

I make it clear that the Scottish Office has no locus in the awarding of that contract. We shall make no indications to anyone as to how we wish the contract to be determined. It will be determined in exactly the same way and with exactly the same strict standards that are applied to any contract for which lenders are made by outside bodies.

I repeat that the Scottish Office has no locus in the awarding of the contract. We shall make no representations to the Ministry of Defence about the awarding of the contract. The Ministry of Defence, no doubt, will apply exactly the same criteria that it has applied in the past. That is a matter for that Department. We shall not interfere, nor shall we make any representations in respect of the contract. We have made that clear.

We must consider that there is a possibility that that contract could be awarded to Western Ferries and, if it were, Western Ferries would wish to use the "Highland Seabird". It is in the public interest that we should make it clear that if it is successful in winning a contract, for which it would use the "Highland Seabird", even the temporary subsidy proposed would either not be necessary at all or would be necessary only to a limited extent. Therefore, it would be the height of irresponsibility not to make any reference to that. We should have been criticised, rightly, if we had failed to make such a reference.

The Government have been asked about their reaction to the Scottish Transport Users Consultative Committee recommendations. The STUCC is an advisory committee. The hon. Member for Garscadden said that when the Islay route was in question the Government of the day accepted the advice of the STUCC. We must examine its conclusions closely. We have no way of anticipating its conclusions. I cannot give any undertaking. What happens will depend on its conclusions, its recommendations and its reasons. Only when those facts are known will it be possible for anyone to come to a considered judgment.

Mr. Robert Maclennan (Caithness and Sutherland)

Why on earth is the undertaking brought before the House before the STUCC has given its opinion? Why are we denied the opportunity of considering the arguments by the STUCC? There is no urgency. The Minister has behaved disgracefully.

Mr. Rifkind

I thank the hon. Gentleman for his usual helpful intervention. We have made it clear that the views of the STUCC will be taken into account. If it is decided to implement the undertaking, and it is appropriate to start that at the beginning of October, it is likely that any inquiry will have been held, we shall know the STUCC's recommendations and therefore it will be possible to come to a judgment.

The hon. Member for Garscadden suggested that it was inappropriate that the Government should create a monopoly on the Gourock-Dunoon route. He is right that Western Ferries, if it is the sole operator, becomes a monopoly in exactly the same way as CalMac is a monopoly on almost every other route in Scotland. It is by no means the preferred solution. It is clearly preferable to have competition. However, it is ridiculous to suggest that a subsidy should be provided to a competitor in order that there should be competition that would otherwise not be there. We should be delighted to see genuine competition on equal terms not only continuing on the Gourock-Dunoon route but introduced elsewhere. However, we have not withdrawn the subsidy from CalMac on Islay because we recognise that it has the bulk of the traffic and has won the support of the island community, albeit only with a subsidy.

However, on the Gourock-Dunoon route, even with a major subsidy, there has, nevertheless, been a constant loss of passenger and vehicular traffic to Western Ferries, although it has no subsidy and is, therefore, in an unfair competitive position with CalMac. From 1976 to 1980, the number of CalMac's passengers reduced from 1 million to 713,000 and its cars from 159,000 to 99,000. In the same period, Western Ferries had significant increases in both.

The hon. Member for Garscadden started by saying that the main consideration should be who can provide the best service to the public, but in the case of Gourock-Dunoon the public have already shown their preference. They prefer to give their support to Western Ferries, although no subsidy is available, instead of continuing to give it to Caledonian MacBayne. I have no doubt local opinion would prefer two services. It would be extraordinary if it did not. That is natural. It is as true in Islay as it is in Gourock-Dunoon.

However, the Government must consider whether the best use of the money is to subsidise the uncompetitive service of Caledonian MacBayne or to use it in other parts of Scotland where it could more directly benefit areas that do not have two routes and may even have no route at all.

It being one and a half hours after the commencement of proceedings on the motion, Mr. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted business):

The House divided: Ayes 116, Noes 48.

Division No. 285] [12.08 am
Alexander, Richard Bright, Graham
Ancram, Michael Brinton, Tim
Atkins, Robert(Preston N) Brooke, Hon Peter
Beaumont-Dark, Anthony Brown, Michael(Brigg & Sc'n)
Beith, A. J. Bruce-Gardyne, John
Berry, Hon Anthony Cadbury, Jocelyn
Bevan, David Gilroy Carlisle, John (Luton West)
Biggs-Davison, John Clark, Hon A. (Plym'th, S'n)
Blackburn, John Clarke, Kenneth (Rushcliffe)
Bonsor, Sir Nicholas Colvin, Michael
Boscawen, Hon Robert Cope, John
Bottomley, Peter (W'wich W) Cranborne, Viscount
Bowden, Andrew Dunn, Robert (Dartford)
Braine, Sir Bernard Elliott, Sir William
Faith, Mrs Sheila Page, Richard (SW Herts)
Fenner, Mrs Peggy Penhaligon, David
Fletcher, A. (Ed'nb'gh N) Pollock, Alexander
Fletcher-Cooke, Sir Charles Prior, Rt Hon James
Garel-Jones, Tristan Proctor, K. Harvey
Goodlad, Alastair Rathbone, Tim
Gower, Sir Raymond Renton, Tim
Gray, Hamish Rifkind, Malcolm
Griffiths, Peter Portsm'th N) Roberts, M. (Cardiff NW)
Hamilton, Hon A. Rost, Peter
Hawkins, Paul Shaw, Giles (Pudsey)
Hawksley, Warren Shepherd, Colin (Hereford)
Heddle, John Skeet, T. H. H.
Hogg, Hon Douglas (Gr'th'm) Smith, Cyril (Rochdale)
Hunt, John (Ravensbourne) Speed, Keith
Johnston, Russell (Inverness) Speller, Tony
Jopling, Rt Hon Michael Spicer, Michael (S Worcs)
Kershaw, Sir Anthony Sproat, Iain
Kitson, Sir Timothy Stainton, Keith
Le Marchant, Spencer Stanbrook, Ivor
Lester, Jim (Beeston) Steen, Anthony
Lloyd, Peter (Fareham) Stevens, Martin
Lyell, Nicholas Stewart, Rt Hon D. (W Isles)
MacGregor, John Stewart, A.(E Renfrewshire)
MacKay, John (Argyll) Stradling Thomas, J.
McQuarrie, Albert Taylor, Teddy (S'end E)
Major, John Temple-Morris, Peter
Marlow, Tony Thompson, Donald
Marshall, Michael (Arundel) Thorne, Neil (Ilford South)
Mather, Carol Trippier, David
Maude, Rt Hon Sir Angus Waddington, David
Maxwell-Hyslop, Robin Wakeham, John
Mellor, David Walker, B. (Perth )
Meyer, Sir Anthony Watson, John
Miller, Hal (B'grove) Wells, Bowen
Mills, Iain (Meriden) Wheeler, John
Moate, Roger Wickenden, Keith
Murphy, Christopher Williams, D.(Montgomery)
Myles, David Wilson, Gordon (Dundee E)
Needham, Richard Wolfson, Mark
Neubert, Michael Young, Sir George (Acton)
Newton, Tony Younger, Rt Hon George
Normanton, Tom
Onslow, Cranley Tellers for the Ayes:
Osborn, John Mr. Selwyn Gummer and
Page, Rt Hon Sir G. (Crosby) Lord James Douglas-Hamilton.
Bennett, Andrew(St'kp't N) Lambie, David
Brown, Hugh D. (Provan) Mabon, Rt Hon Dr J. Dickson
Buchan, Norman McCartney, Hugh
Campbell-Savours, Dale McElhone, Frank
Canavan, Dennis Maclennan, Robert
Cocks, Rt Hon M. (B'stol S) McTaggart, Robert
Cook, Robin F. Marshall, D(G'gow S'ton)
Cowans, Harry Marshall, Jim (Leicester S)
Cryer, Bob Maxton, John
Dalyell, Tam Millan, Rt Hon Bruce
Dewar, Donald Morton, George
Dixon, Donald O'Neill, Martin
Dormand, Jack Powell, Raymond (Ogmore)
Duffy, A. E. P. Prescott, John
Eadie, Alex Robertson, George
Evans, John (Newton) Ross, Ernest (Dundee West)
Ewing, Harry Skinner, Dennis
Forrester, John Smith, Rt Hon J. (N Lanark)
Hamilton, W. W. (C'tral Fife) Snape, Peter
Harrison, Rt Hon Walter Soley, Clive
Hattersley, Rt Hon Roy Strang, Gavin
Hogg, N. (E Dunb't'nshire) Welsh, Michael
Home Robertson, John
Homewood, William Tellers for the Noes:
Hoyle, Douglas Mr. Allen McKay and
Hughes, Robert (Aberdeen N) Mr. Frank Haynes

Question accordingly agreed to.

Resolved, That the draft Undertaking between the Secretary of State for Scotland and Western Ferries (Argyll) Limited, which was laid before this House on 10 July, be approved.

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