HC Deb 22 July 1981 vol 9 cc454-61 1.30 am
The Under-Secretary of State for Scotland (Mr. Malcolm Rifkind)

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

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

It may be for the convenience of the House if with this we take the following motions: That the draft Undertaking between the Secretary of State for Scotland and the Northern Shipping and Trading Company (Helmsdale) Limited, which was laid before this House on 10 July, be approved. That the draft Undertaking between the Secretary of State for Scotland and William Dennison (Shapinsay) Limited, which was laid before this House on 10 July, be approved.

Mr. Rifkind

As right hon. and hon. Members will recall, I sought approval at the beginning of this year for a series of draft undertakings with a number of bulk shipping operators. On the West Coast we wished to assist Glenlight Shipping Ltd., and in Orkney and Shetland the shippers Hay and Company Ltd. of Lerwick, and Shetland Line Ltd. Since receiving the approval of the House in January for those undertakings, the Government have been assisting the operators concerned by providing for percentage reductions on their normal tariffs. For 1981–82, the rebates allowed on traffic with Orkney and Shetland are 12½ per cent. on goods going north into the islands and 45 per cent. on goods going south out of the islands. On the West Coast we have given a uniform rebate of 25 per cent. on all traffic.

The three undertakings now before the House arise from approaches made to the Government by the right hon. Members for Orkney and Shetland (Mr. Grimond) and for Western Isles (Mr. Stewart) following our previous debate and are designed to bring the companies concerned within the tariff reduction schemes which we have developed for freight operations. These arise, of course, from our clear commitments to the survival and prosperity of the Scottish island communities and acceptance of the importance of sea freight costs to the islands.

In the case of Northern Shipping and Trading and the Kirkwall-based firm of Dennison, the main traffic to be assisted will be bulk cargoes into Orkney, and we propose to apply to them the 12½ per cent. or 45 per cent. rates already mentioned, which differentiate between north and south-bound traffic. The relevant undertakings are similar except for clauses 1 and 4. Clause 1 is cast more widely for Dennison in that it refers to the Highlands and Islands. While we do not propose at the present time to grant assistance on services other than those to Orkney and Shetland, this formulation will allow us the flexibility to consider further—at the company's request—the possibility of assisting shipments from East Coast ports to the West Coast islands. The Dennison clause 4 also differs and, as with the undertaking in force with Hay and Company of Shetland, is designed to ensure that any benefit which the company derives from the subsidised carriage of its own merchandise is passed on to the consumer.

The undertaking with Cunningham of Scalpay is cast in precisely the same terms as that with Dennison. We propose to institute a uniform rebate of 25 per cent. to bring this company into line with Glenlight Shipping Company. This will affect its rates on the West Coast and will be particularly important in the carriage of Calor gas, which is almost entirely carried in Cunningham vessels.

I should also like to draw attention to the fact that we propose to provide interim assistance to Hugh Carmichael, who operates a small West Coast puffer out of Mull. Because this assistance is less than £10,000, it does not require the approval of the House. This assistance will allow the 25 per cent. reduction rate to be available on this company's services. Discussions have also taken place with one other operator, J. and A. Gardner, but for the moment we are unable to propose any assistance as it presently falls outside the scope of the Act because the bulk of its services fall outwith the Highlands and Islands area. I have, however, asked for further discussions to take place.

I shall not take up the time of the House with a rehearsal of the advantages of the tariff reduction scheme, which is becoming increasingly well known among the island communities. Suffice to say that the subsidy is directed towards the users of a service rather than to the shipping operator and that it will be clear to each customer on his invoice how much assistance has been granted. The cost of these proposals to the Exchequer, assuming a start date of no later than 1 September, will be about £70,000 for the rest of this financial year and around £120,000 in a full year. This cost is made up from estimates of the full year cost of assistance of £50,000 to Dennison, £15,000 to Northern Shipping and £55,000 to Cunningham. The cost will be met out of existing public expenditure provision. In deciding to extend the scheme to cover these additional operators, we have been guided by a desire both to spread the benefits of the scheme throughout the islands and to ensure that established operators may compete on an equal basis

I know that there is widespread support in the House for measures that will prove of direct benefit to the Islands. Accordingly, I commend the draft undertakings to the House for its approval.

1.35 am
Mr. Donald Dewar (Glasgow, Garscadden)

I think that this will be a comparatively brief debate. Certainly it would be churlish of the Opposition not to say that we welcome the assistance given to these undertakings, or, more specifically, to the users of them, in the Highlands and particularly in the Islands.

In a sense, however, I regret that the debate is taking place at this particular time. We know that before the House rises at the end of next week there is to be a statement—I presume that it will be in the form of a written answer—in which the Government will finally reveal all on the subject of the road equivalent tariff, as we were told last night in the debate on the far more contentious matter of the transfer of subsidy from Caledonian MacBrayne to Western Ferries on the Gourock-Dunoon run. We have been awaiting that statement for a long time.

It is unfortunate that we are considering these undertakings at a time when it is still not clear—and it will not be clear until we know the Government's final intention on the matter—whether they are bridging arrangements until some variation on the road equivalent tariff is introduced, or whether RET will be quietly buried—or, to use a more appropriate expression, dropped overboard—and these ad hoc arrangements will become semi-permanent and be regarded as the Government's final solution to the problem of shipping services to the Western Isles and the Islands generally.

The road equivalent tariff was a manifesto commitment whistled up by the Conservatives to buttress the rather thin case that they were putting to the electorate. Since then, it has clearly been causing interminable trouble. The pain of actually trying to find some workable scheme is acute, and we have waited a long time since the promise that there would be an answer to the consultations early this year.

Frankly, I should have preferred it if the Government had been able to say something about RET tonight, or, if that was too difficult, if they had arranged for the statement on it to be made before this debate, so that the permanence and suitability of these schemes could be measured and judged against the final shape of the RET solution, if that is what is to emerge.

This matter arose at Question Time on 15 July. One of the few points to come out of that exchange was when the right hon. Member for Orkney and Shetland (Mr. Grimond) expressed the wish that when we knew whether it was to be the RET solution, or otherwise, there should be a debate upon it. The Secretary of State hurried, as he often does on such occasions, to agree—no doubt he was glad to find something with which he could agree—that a debate would be a splendid idea.

As a written question on the subject is likely to be planted on the last possible day, at a time when it will be impossible to have a debate before the House rises for the Summer Recess, it will probably be October or November before we have any opportunity to discuss that statement. I regret that. Perhaps the Under-Secretary of State will therefore say a few words about what arrangements he will be making for a debate, when it will take place and whether he envisages it being on the Floor of the House or in the Scottish Grand Committee, and in what format. Clearly, while I accept with great regret that a debate is probably impracticable before the autumn, we shall certainly want an opportunity to look very closely at how the Government are implementing their manifesto pledge, even though it has since been somewhat reinterpreted by the Under-Secretary of State as moving towards the principle of RET.

Mr. Rifkind

That is not so.

Mr. Dewar

I thought that the manifesto was more definite. I take the Minister's word for it that he was parroting the words of holy writ. In any event, we shall be anxious to know what that means at the end of the day.

We have always had doubts about a rigid application of the RET formula. There are obvious problems in accommodating the longer distances to the more remote islands which may come badly out of some possible equations. I am still suspicious of the idea that the scheme should be abandoned. We cannot debate it at length, because we do not have the necessary information, although it is relevant to the orders. The Minister owes us some words about the Government's intentions in terms of programme and debate.

We welcome the undertakings so far as they go, but there is one small point of detail that I want to raise. It may be a revision of the reduction in tariffs. The Minister referred to 12½ per cent. on freight moving northwards and 45 per cent. on traffic going south. In the last debate it was 42½ per cent. Will the hon. Gentleman clear up which is which?

I am worried about the methods used to decide on these tariff reductions. It looks as though we are falling into a general scale which is to be applied throughout the companies affected as to 25 per cent. for the West Coast general trade and the stepped 42½ per cent.—12½ per cent., if that is correct, for Orkney and Shetland. I am not sure of the rationale on which that has been decided, and I do not know whether the Minister can say a great deal more to help us on the matter.

Will any company carrying bulk cargoes in this area be able to get this kind of subsidy on application? That seemed to be the implication of what the Minister said. He ruled out J. and A. Gardner, which is based in Glasgow and has Europe-wide interests, on the ground that it was more widely based than a firm operating in a Highlands and Islands setting.

Are we to assume that any carrier with that specialist interest, the bulk of whose revenue comes from that trade, can now expect to get this level of assistance? My understanding is that until recently Gardner had a substantial trade carrying road metal to the Highlands. I recognise that that must be a very small part of its turnover. However, we seem to be getting to the point of offering these subsidies almost as a matter of course. I do not object to that. I just want to establish whether that is the position.

I notice that none of the draft undertakings has any direct loss subsidy element. There was a direct loss subsidy element in the Glenlight undertaking. I do not know why that should be. I suppose that it may have had particular financial difficulties. Perhaps the Minister will tell us something about the criteria. In the first year, Glenlight was offered a direct loss subsidy of £100,000, with the possibility of continuing payments. Will that now be ruled out, or will it be included in future agreements of this kind?

We are interested in seeing a genuine commitment by the Government—indeed, by any Government—to solving the problems of the carriage of freight to the Highlands. We shall monitor carefully how these schemes develop. I am perhaps suspicious about these matters. My worry is that if a firm is subsidised to reduce its fares by 10 per cent. to the customer, in some mysterious way the fares will rise until the customer is paying the same and the 10 per cent. is pocketed as an extra profit margin. I presume that the Government will keep a close watch on that in the annual financial returns that have to be submitted. It would obviously be a rather unfortunate abuse if that were to happen. Having said that, I accept that the idea that the benefit goes to the customer is an important one and one that everyone on the Labour Benches would. endorse.

The Minister said that about £120,000 would be added to the costs in a full year. In 1980–81 the subsidy figure for these shipping services was £1.6 million, and the last clutch of orders added about £150,000 to the total, so that we are now looking at between £1.8 million and £1.9 million. The Minister might care to confirm that those figures are up to date and perhaps give us some idea of the likely costs in 1981–82.

We are glad that something is being done, but we await with great curiosity and with a little caution to see what is likely to come out of the statement which we have so long awaited, and which is being slipped so quietly into circulation in the dying days of the Session.

1.46 am
Mr. J. Grimond (Orkney and Shetland)

A letter that I received from the Under-Secretary of State announcing these subsidies contained, thought, a rather touching paragraph, which said that he hoped I would congratulate the Government on this matter. So few congratulations are offered to the Government that here I am, at 1.45 am, with my heart wrung by the appeal to my better nature to congratulate the Minister, which I heartily do. It is 'very welcome and it may be a small crumb of satisfaction to the Government to have it confirmed that someone is pleased with something they do. I welcome it, and it will be of help to my constituents.

I am glad that the Government are extending the subsidies to small firms, because these are important, particularly in regard to bulk cargoes. I also welcome the fact that the subsidy will go to the users, to the consumers or to their shippers, as it may be. That will be a definite help to my constituency. I repeat my gratitude to the Government.

I cannot let the question of road equivalent tariff—RET—pass unmentioned. The Secretary of State seemed to express a hope that he would make an announcement in time for some form of discussion of his decision concerning RET before we rose for the holidays. That seems to be a declining possibility. I want to put once more on record my view about RET. The Orkney Island council is strongly in favour of it. I quite see the council 's point. It is a definite proposal—the projection of the old plea that the sea routes to the islands should be treated as main roads. But other island councils and island communities will not come out so well and are much more doubtful about it.

I do not really mind how the help is given. I should like it to be given as simply as possible. I have come to the conclusion that the simplest way may be to give a straightforward subsidy on the lines of these orders, without a complicated calculation on the road equivalent tariff. That is the simplest way of helping the freight charges to the islands. Therefore, if the Government come to the conclusion that they should go forward on this line, I shall have no objection to it. But I hope they will come to a decision soon, not because they have been ungenerous—they have been rather generous about help to the Islands—but because it is a continuing source of anxiety.

The Government need not be told again that it is the greatest handicap to the Islands that they have to pay such enormous freight charges. As the right hon. Member for Western Isles (Mr. Stewart) and I have said, another way would be to reduce the excise duty on petrol and oil. That would be a great help to transport. It would be simple to do and could easily be monitored. Whatever happens, I hope that the Government will tell us a little more tonight than they did last night. I hope that the Minister will indicate when the Government hope to make an announcement and how it is to be discussed. I suppose that the Scottish Grand Committee could be reconvened. That is probably not outside the bounds of order. However, the island communities would like to think that Parliament will discuss the proposal when it is announced. They would like to think that the Government are committed to making an announcement, at least before the Session ends.

With those few words about RET, I welcome these draft undertakings. I am grateful for the help given and I hope that the Government will tell us a little more about their general policy on assistance to freight tonight, or soon.

1.50 am
Mr. Donald Stewart (Western Isles)

I, too, welcome the draft undertakings. I am particularly relieved and pleased that my constituent, Roderick Cunningham (Scalpay) Limited, has been included in the arrangements for aid to shipping. The firm operates, as most hon. Members will know, from a small island. All shipping companies on the West Coast find it difficult to run economical services. The coasters run by Cunningham's perform an essential service for the West Coast, particularly in the transport of Calor gas.

The subject of road equivalent tariff has been raised. As has been said, the Western Isles Council has expressed certain reservations about the formula. I regret that. However, the Highlands and Islands Development Board has rightly pointed out that certain adjustments and variations can be made within the formula. I hope that that will be borne in mind. Like the right hon. Member for Orkney and Shetland (Mr. Grimond), we are not unduly concerned with how things are done, providing that action is taken to assist us in gaining an economical transport system.

In its election address the Conservative Party promised to assist the Scottish Islands. I congratulate it on going a considerable way towards redeeming that promise. The draft undertaking will improve economic and social conditions in the Highlands and Islands. On behalf of my constituents, I thank the Government for that action and welcome it.

1.53 am
Mr. Rifkind

I thank right hon. and hon. Members for the welcome that has been given to these undertakings. After the Liberal Party voted with the Government on the Western Ferries undertaking last night, it is almost too much that the right hon. Member for Orkney and Shetland (Mr. Grimond) should congratulate us again tonight. We regret only that such things happen when the Chamber is not as full as it might be. Similar thanks go to the right hon. Member for Western Isles (Mr. Stewart).

The hon. Member for Glasgow, Garscadden (Mr. Dewar) revealed a most unexpected fact by suggesting that, in saying that we are committed to moving towards RET, we have departed from our manifesto commitment. He has revealed something that I had not expected for one moment, namely, that he has not read our election manifesto. Clearly his allegations were based on wild speculation and not on his normal, informed, diligent research, for which he is well known. He has plainly fallen down on that this time.

We intend to make a statement before the House rises for the Summer Recess. Obviously, it will not be possible to have a debate before the House rises. However, as my right hon. Friend the Secretary of State implied, we accept that it is desirable to have an early debate on the Government's proposals. I am sure that those responsible for these matters will be able to ensure that this is achieved.

Mr. Dewar

I accept reluctantly that it is impossible to have a debate next week. I presume that the statement will be made in response to a written question—I do not say this pejoratively—requested by the Government. An hon. Member will be invited to table the necessary question. Can the Minister give an assurance that this will be done early next week when there will still be a fair number of hon. Members in the House rather than on 31 July or the eleventh hour and fifty-fifth minute before the Summer Recess? Will the debate take place in the immediate return period in October? Will it be upstairs or on the Floor of the House?

Mr. Rifkind

On the hon. Gentleman's first question, I can assure him that the Government have no wish to delay any statement on the matter longer than is necessary. The more hon. Members who are still around the House to be made aware of the contents of the statement, the greater the Government's delight. The form of a debate is not a matter for me. It is the sort of issue that might be appropriate for debate in the Grand Committee. The Government have come to no conclusion. Any representations by the Opposition will be taken into account.

The hon. Gentleman asked detailed questions about the undertakings. He wished to know whether the figure of 45 per cent. is correct, and indicated that he seemed to recollect a previous figure of 42½ per cent. No figures of that kind appear in the undertakings themselves. These are matters that the Secretary of State can adjust. These figures have been adjusted and are at present at the level of 45 per cent. The figures are worked out very much on the basis of representations from the island communities.

The percentages were the result of proper consultation with island communities and island councils about the manner in which the sums available should be divided to give the maximum benefit to the island communities. The advice that the Government received and were happy to implement was that the greatest help would be achieved if the bulk of the available resources were concentrated on exports rather than imports. That is how the figures were decided.

Mr. Dewar

It is clearly in the interest of the island communities to get as big a reduction in tariff as possible. The Government, I presume, have a global sum in mind. They may listen to representations about how it should be distributed between, for example, north and south journeys or types of freight. How is the global sum decided? The Government might think that 50 per cent. of a reduction was all that could be afforded. There is no way in which the Government can be persuaded by the island communities to change that view. The Minister should therefore give more details of how total expenditure for each of these firms is arrived at.

Mr. Rifkind

The hon. Gentleman is correct in saying that there is a finite limit on the resources available at any one time. The Government have sought to ensure that on the particular charges that would otherwise be charged by the companies concerned there can be a 45 per cent. or 12½ per cent. reduction, depending on whether we are talking about exports or imports, to benefit the economy of the islands. The hon. Gentleman asked whether any company that applied would be able to receive such a grant. This will depend on two factors. First, it depends on whether a company fits the criteria under which undertakings can be brought forward. Companies have, for example, to operate predominantly within the Highlands and Islands area.

Secondly, it will depend on the resources available in any given year. So far the Government have been able to respond to all the applications made that come within the relevant criteria. We are pleased about what is at this stage a reasonable position.

The hon. Gentleman also asked whether there was scope for a company to take advantage of the subsidy and therefore put up fares in a manner that it would not otherwise have chosen in the knowledge that the Government will provide the appropriate subsidy. That cannot be done. The undertakings enable the Government to monitor closely the financial situation as it affects an individual company. To be fair to the companies, it must be said that all have accepted that the purpose of the undertakings is not to benefit the companies. None benefits by one penny from the sums being made available. The way in which the subsidies are provided, the undertakings framed and the monitoring carried out will ensure that the island economies benefit, and any indication to the contrary would result in significant changes in how the system operates.

I thank right hon. and hon. Members for their welcome to the undertakings. As both right hon. Members have said, the Government have already gone a substantial way towards honouring their manifesto commitment, and I have no doubt that further changes in the near future will be seen by those concerned as a further demonstration of the Government's intention to ensure the viability of Scotland's island communities.

Question put and agreed to.

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

Resolved, That the draft Undertaking between the Secretary of State for Scotland and the Northern Shipping and Trading Company (Helmsdale) Limited, which was laid before this House on 10 July, be approved. That the draft Undertaking between the Secretary of State for Scotland and William Dennison (Shapinsay) Limited, which was laid before this House on 10 July, be approved.—[Mr. Rifkind.]

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