HC Deb 21 February 1984 vol 54 cc697-704 3.32 pm
The Secretary of State for Scotland (Mr. George Younger)

With permission, Mr. Speaker, I should like to make a statement—[Interruption.]

Mr. John Maxton (Glasgow, Cathcart)

On a point of order, Mr. Speaker—

Mr. Speaker

Order. The Minister cannot be heard.

Mr. Maxton

That was exactly the point of order, Mr. Speaker. I cannot hear a word

Mr. Speaker

Order. I hope that right hon. and hon. Members will leave the Chamber as quickly as possible.

Mr. Younger

With permission, Mr. Speaker, I should like to make a statement on my proposals for financial assistance in 1984–85 for shipping services to the Scottish islands, and also to announce my conclusions on the future system of shipping subsidy.

I propose to give deficit grants of £7.2 million to Caledonian MacBrayne and of £900,000 to the Orkney Islands Shipping Company. These grants will limit the need in both cases for the companies to increase their fares to approximately 5 per cent. overall for the year. I propose also to increase support offered to P and O and to the various bulk shipping companies with which I have undertakings to allow them to continue to rebate the fares and charges on their services. The rebates are estimated to cost £3.65 million in the case of P and O and £1.6 million in the case of the bulk shippers.

In total, Government revenue support in 1984–85 will amount to some £13.35 million, an increase of 9.9 per cent. over the current financial year, and more than a threefold increase since 1978–79. I hope that this will be recognised as an excellent deal for the users of these services and for the island communities that they support.

I am also able to announce today that I have completed my review of the future system of shipping subsidies and have concluded that a change to a road equivalent tariff-based system of subsidy should not be pursued. I have taken this decision after detailed consideration of the difficult practical issues that would arise if RET were implemented. In particular, full implementation would not distribute the greatly increased subsidy that would be required to where support is most needed. Moreover, since the subsidy system would still have to be adapted to be acceptable to all communities affected by it, the system would not be objective or above dispute. The required adaptations would also increase the cost, and there would be considerable confusion during the necessarily lengthy transitional period.

I have also taken into account several other developments since 1979. First, it has become clear that a period of major new capital investment lies ahead, in new ships and in the associated terminals, for both Caledonian MacBrayne services and those serving Orkney and Shetland. There is, therefore, substantially more public expenditure to be committed on our shipping services than is indicated by the annual revenue grants alone, and it is vital for the maintenance and improvement of these services in the longer term that resources be made available for these capital works.

Second, I attach much importance to the Monopolies and Mergers Commission's general recommendation that, in the interests of efficiency, Caledonian MacBrayne's fares should be related to costs incurred. This adds weight to the practical objection to RET. Besides offering no encouragement to efficient operation it would, by stimulating demand, itself increase the need for new investment in shipping capacity. Since the subsidy requirement would be calculated automatically by reference to a formula unrelated to shipping costs, that requirement could change considerably from one year to the next. Sudden increases in subsidy could be achieved only at the expense of other services for which I am responsible.

It is, however, important to have a fares system that is clearly understood. P and O and the bulk shippers are private sector operators who fix their fares and charges on a commercial basis, the charges being rebated with the benefit of subsidy. These arrangements will continue. In the case of Caledonian MacBrayne, the Monopolies and Mergers Commission noted the company's policy that fares on one route should be comparable with those on another, and that a standard fare scale should be adopted consisting of three elements: pier dues, toll charges—reflecting the cost of loading—and distance charges. Such a system should produce a structure of fares tapering with distance. The commission noted that no recent progress had been made with this system and that as a result significant anomalies now exist in the fare structure. It recommended that Caledonian MacBrayne should make renewed progress towards such a system, starting with an up-to-date examination of the structure of costs. I have asked the company to proceed on this basis. The new fares system will take some years to implement fully, but a start will be made in fixing the charges for 1984–85, which the company will be announcing shortly. The result will be a standard fares system which should be more equitable than at present.

The question I have had to address is how, in the light of some significant developments since 1979, we can offer the best long-term guarantee of services to the Scottish islands. My subsidy proposals for 1984–85, together with my substantial capital support to ships and terminals, confirm the Government's continuing commitment to the maintenance and improvement of these services.

Mr. Donald Dewar (Glasgow, Garscadden)

Will the Secretary of State note that any increase in support for these services is welcomed by the Opposition but that there will be less of a welcome for any suggestion of increased fares?

So that we may put into perspective the figures that the right hon. Gentleman has given, will he note that in May 1982 the Select Committee on Scottish Affairs, in recommending a road equivalent tariff on a running cost basis, estimated that the annual costs would be £19 million to £20 million? So the shortfall on those figures is still very apparent.

Will the right hon. Gentleman note that we rather admire the splendid euphemism of his announcement that RET "should not be pursued"? That must mean that it has been totally abandoned. Will he accept that there will be widespread disappointment about that in many quarters? The Select Committee favoured it on the ground of equity, in response to the problems of island life. Will he further accept that there are many real problems of which he should be aware?

Will the Secretary of State accept that many Tories will be embarrassed by this announcement because they have used the RET commitment on many occasions in elections in the past few years? It is a long, sad retreat from the heady days of the 1979 manifesto commitment and, like the rating review and a number of others, is yet another example of broken promises.

Will the right hon. Gentleman say a word or two about the suggestion that Caledonian MacBrayne fares should be related to costs incurred? Will he give an assurance that there is no suggestion that fares will be artificially forced up or that there will be bad news for the more remote communities whose services are more lightly used?

Will the right hon. Gentleman also accept that we are surprised at the argument that is used against RET that it would increase demand for new shipping capacity? I should have thought that we would want more people to use the ferries and for them to carry the maximum possible traffic.

Having abandoned RET and left only an ill-defined commitment to a new fare structure for Caledonian MacBrayne and ad hoc arrangements for the other carriers on those routes, may I warn the right hon. Gentleman that we shall continue to monitor closely the policy as it develops to ensure that the island communities obtain the support that they deserve?

Mr. Younger

I am most interested in the hon. Gentleman's points. First, may I clear up precisely the question of what was said in the Conservative party's manifesto as there seems to be some doubt about it. Our policy was made perfectly clear. The words used were: We will re-examine the structure of the subsidies and are prepared to increase them in real terms as part of the process of moving closer to road equivalent tariffs. That undertaking has been fully carried out, and the hon. Gentleman cannot get away from that.

The hon. Gentleman's point about the Select Committee's support for RET and its introduction has to be seen against the background that it is perfectly clear that a number of important island communities would have been adversely affected by the introduction of RET in the sense that they would have had to pay higher fares than they are paying at present. The hon. Gentleman must address himself to that fact if he is to advocate the full introduction of RET, leaving aside for a moment the considerable extra cost of about £10 million above the figures that I have announced today.

The hon. Gentleman mentioned comparisons and said that he will monitor carefully what happens. May I remind him that in the last three years of the previous Labour Government the subsidy to those shipping services was reduced in real terms every year. The Government have increased them in real terms every year. That is the measure of our support for the islands.

Mr. John Corrie (Cunninghame, North)

Will my right hon. Friend accept that there will be bitter disappointment among the island people that, after looking at the matter so closely, we have not managed to find a formula that is fair to all the routes throughout the islands? Will he also accept that they will be delighted to hear that the subsidy is again to be increased and that so much money is to be spent on piers, harbours and new boats?

Will my right hon. Friend monitor how Caledonian MacBrayne will restructure the fares? There is no doubt that the island people of Arran and Cumbrae are convinced that they subsidise the rest of the west coast of Scotland and that the present structure is not fair to certain routes and needs to be changed.

Mr. Younger

I appreciate that some communities which thought that they would benefit from RET will be disappointed that it will not be brought in. Conversely, other communities which clearly thought that they would not benefit and, indeed, would be worse off will be glad to know that we have not dogmatically forced that solution upon them.

I am grateful to my hon. Friend for what he said about subsidies. It is worth reminding the House that they are now three times the level that they were when we came into office. I am sure that my hon. Friend and his constituents will greatly appreciate that, together with the large amount of capital expenditure that we are now putting into those services, in particular into the new ship for the island of Arran which is shortly to come into service.

Mr. Donald Stewart (Western Isles)

I acknowledge the subsidy that the Government have given to coastal shipping in the past four years, but is the Secretary of State aware that his statement today will be a greater disappointment to those looking forward to the implementation of the suggestions of the Highlands and Islands Development Board, the Western Isles Council, the Select Committee and others that RET should be introduced?

Is he aware that this represents a betrayal of his election promise? The statement that there would be a move towards RET was taken, and was meant to be taken, as a development that would occur in due course. What has happened will be regarded as a complete sell-out of that promise.

Mr. Younger

I cannot agree with the right hon. Gentleman. He might have done rather better, for example, by acknowledging that we have vastly increased the subsidy to his constituents and their ferry services. As for his disappointment, I did not expect him to take that line because several important communities in his constituency would have been very adversely affected by the change.

The right hon. Gentleman might also have mentioned that we are proposing to build a new vessel as a replacemnt for the Hebrides, which serves some of his constituency, and that we are proposing new pier works costing up to £5 million at Uig, Tarbert and Lochmaddy. I should have thought that the right hon. Gentleman would have something good to say about so much good being done for his constituency.

Mr. Barry Henderson (Fife, North-East)

Will my right hon. Friend accept that not just Consevatives but all fair-minded people believe that he has gone far enough in the direction of road equivalent tariff, because, although it sounds fine, there are real difficulties, and possibly disadvantages, for many communities? Does he agree that more important as a commitment to the fair treatment of the islanders is the sums of money that he is providing to support their activities, rather than any formula or theory?

Mr. Younger

I strongly agree with my hon. Friend. It must be borne in mind that the considerable cost of road equivalent tariff is way beyond even the much-increased levels of subsidy which we have now given. As my hon. Friend implied, it is worth bearing in mind that, thanks to increases in subsidy, most ferry services have not had an increase in fares since April 1981. That puts into perspective the increase that will take place this year of about 5 per cent. There are communities in many other parts of Western Europe that would be glad to be treated in that way.

Mr. David Lambie (Cunninghame, South)

Is the right hon. Gentleman aware that his statement will cause much anger and dismay among the island communities off the west coast of Scotland, especially as the all-party Select Committee on Scottish Affairs, in its unanimous report on ferries, recommended the introduction of RET in the financial year 1984–85?

How can the Minister justify the Conservatives reneging on their 1979 election promise, and on the evidence that Ministers gave to the Select Committee, to move towards a system of RET? How can he say today that he will no longer carry out those promises when he gave evidence to the Select Committee to the effect that it was a definite commitment not only of the Tory party in Scotland but of the Government of the United Kingdom?

Mr. Younger

The hon. Gentleman's first question was about our election manifesto commitments. I hope that I have made it clear that we have fulfilled absolutely and in full the undertakings that we gave on this matter in the manifesto.

Secondly, the hon. Gentleman asked how I could justify these decisions. I can justify them by the fact that we have increased, by three times, the subsidy level and that we have secured a freeze on fares for at least the past three years. Had the island communities been told five years ago that that was what they would get in the coming five years, they would never have believed it, yet they have got it, thanks to the Government.

Mr. James Wallace (Orkney and Shetland)

I welcome the Secretary of State's announcement of the subsidies for 1984–85. However, is it not a fact that his statement represents a complete backtrack of previous statements made by Scottish Office Ministers, including one made as recently as October 1982 in response to the Select Committee's report, which highlighted many of the structural problems on which the Government have made a U-turn and which they are trying in this statement to cloak over?

The right hon. Gentleman said that an RET system, with the required adaptations, would cost more. With those adaptations — which would take account of the difficulties of many of the separate island communities—how much more would it have cost? By knowing the sum, the people of the islands will be able to know by how much the Government have short-changed them as a result of their U-turn in policy.

Mr. Younger

Of all the hon. Members I would expect to say something like that, the hon. Gentleman is the last. He did us the grace to start by welcoming the Government's actions. He has done so on previous occasions, and I thank him. I point out to him that, if the Government were backtracking in his constituency, they would return to having no subsidy of any kind. The Government brought in a subsidy for shipping services, and the hon. Gentleman ought to recognise that. If he thinks that there is any justification in his remarks, I am sure that his constituents take a different view. They will recognise that the percentage grant going to the Orkney and Shetlands shipping services is of major assistance to everyone who lives on those islands.

Mr. Michael Hirst (Strathkelvin and Bearsden)

Does my right hon. Friend agree that the Scottish people will welcome the increase in real terms in the subsidy, and especially the support for future capital expenditure? Will he take this opportunity of reminding the Scottish people, in considering the Government's record on this point, of the shabby treatment that they received from the Labour Government?

Mr. Younger

I agree with my hon. Friend's latter point. I am trying to remind the Scottish people of that shabby treatment, and I hope that we shall see no more of it.

It is worth mentioning the widespread nature of capital investment. The new Arran vessel is due shortly to come into service. There is a further new vessel to replace the MV Hebrides and the St. Clair will be refurbished for Shetland service. There is soon to be a decision on a replacement for the MV Orcadia. There are terminal developments at Uig, Tarbert and Lochmaddy. There is reconstruction work at the ferry terminal at Scrabster. Recently work has been completed on pier improvement at Tiree, and further financial assistance will be required to improve the steamer berth at Mallaig and the pier at Tobermory. No one could say that that is neglect. If it is, people previously suffered much more neglect.

Mr. John Maxton (Glasgow, Cathcart)

Has the Secretary of State received the resignation of the Under-Secretary of State for Scotland, the hon. Member for Argyll and Bute (Mr. MacKay), who must feel bitterly disappointed about the statement in view of the pressure about the ferries he applied for his constituents? Is the right hon. Gentleman aware that there will be considerable disappointment on the island of Arran, especially when it is linked with the threatened closure of the station at Ardrossan harbour? Does he not think that there is an anomaly between building a new boat for the island service and at the same time closing the vital railway link with the boat and with the island?

Mr. Younger

I believe that my hon. Friend the Under-Secretary of State will feel that the extra subsidy given for the ferry services in his constituency is widely appreciated and will continue to be appreciated by his constituents.

I hope that this year the hon. Gentleman will greatly enjoy his holiday visit to Arran on a new vessel provided by the Government. I am sure that he will write me a letter of thanks.

Mr. Albert McQuarrie (Banff and Buchan)

I am sure that my right hon. Friend's welcome news on the subsidies for the shipping lines will be appreciated by those who use them. Will he give an undertaking that the work on the new vessels, plus the refurbishment of other vessels, will be carried out in Scottish yards and not in other places?

Mr. Younger

I appreciate my hon. Friend's point. The replacement vessels and other vessels will be put out to competitive tender in the normal way. Naturally, I hope that Scottish yards will obtain all the orders, but I cannot give a guarantee unless, in every case, they are competitive.

Mr. Tam Dalyell (Linlithgow)

The Secretary of State preens himself on the £5 million that will go to Uig, Tarbert and Lochmaddy. He lectures us by saying that we should see things in perspective. How about comparing that £5 million with expenditure on those other islands in the south Atlantic—

Mr. Speaker

Order. I believe that the hon. Member is about to say something with which I must disagree.

Mr. Dalyell

I believe that the point has been made.

Mr. Younger

I am glad to say that the many responsibilities of the Scottish Office do not include subsidising activities in the Falkland Islands.

Mr. Bill Walker (Tayside, North)

Does my right hon. Friend agree that February 1984 will be seen by the Scottish people, especially those living in the Highlands and islands, as being a good month, when the livestock compensatory allowances were announced and very generous allowances are being given so that services to the islands may be maintained at a satisfactory level?

Mr. Younger

I am grateful to my hon. Friend, and I agree with him. I am sure that those involved in agriculture on the islands will greatly appreciate the extra subsidies that we have announced today.

Dr. Norman A. Godman (Greenock and Port Glasgow)

The right hon. Gentleman mentioned a few moments ago a vessel that was built by Fergusons at Port Glasgow for Caledonian MacBrayne, which was launched by his daughter. Speaking as an ex-shipwright, may I say that it was a brilliant launch. I would not expect to have to ask the Secretary of State for an assurance that the vessels will be built in Scotland. I want to see them built in Scotland and, of course, on the Clyde. If orders for the new vessels are placed this year, when can we expect answers to our questions on the orders?

Mr. Younger

I am grateful to the hon. Gentleman for his comments about the launch and I shall pass on his congratulations to my daughter. It is intended to place an order for the replacement vessel for the MV Hebrides, which I announced when I was in Port Glasgow. and it is expected to place that order fairly soon. Naturally, I hope that Scottish yards will tender and be successful. It will have to be considered in the normal way whether the Scottish yards' tenders are competitive with all the bids that are received in due course.

Mr. David Harris (St. Ives)

I do not begrudge the generous grants and loans that are given to the Scottish islands, but will my right hon. Friend have a word with his fellow members of the Cabinet and remind them that there is another island community in the United Kingdom—the Isles of Scilly, in my constituency—which does not receive a penny in operating costs for its ferry services yet has similar problems to those experienced by the Scottish isles? Will he do his utmost for the Isles of Scilly and join me in correcting this unjustice?

Mr. Younger

I am grateful to my hon. Friend for the comparison that he has made. I appreciate entirely the constituency issue which he has raised, which I shall draw to the attention of the Minister who is responsible.

Mr. Russell Johnston (Inverness, Nairn and Lochaber)

The Secretary of State suggests that there are structural faults in RET which cannot be overcome. If that be the case, why is it that as recently as 1982 the Government supported the principle in Select Committee? Why is it that the main and most informed body in the north, the Highlands and Islands Development Board, continues to support RET, and how is it that the Norwegian Government can overcome these alleged problems?

Mr. Younger

I appreciate the hon. Gentleman's points. The structural problems arise when we apply an absolutely clear system of relating the distance travelled by sea to the theoretical distance travelled by road. That system makes the journey more expensive for a number of important island communities. That is the major structural problem which we have been trying to overcome. We have found no satisfactory method of doing so and we consider it better to move on to the new system which. I have announced, which will provide security and a sensible system for the future that will be related to the costs involved.