§ 8.51 p.m.
§ Lord BELHAVEN and STENTON rose to ask Her Majesty's Government whether, taking account of representations 1679 from the people of Islay, they will now allocate to Western Ferries a fair share of the £2½ million subsidy granted to Caledonian MacBrayne, in view of the fact that Western Ferries are the principal carriers to the island. The noble Lord said: I am sorry that my Unstarred Question has come on at such a late hour, but I hope that I shall be able to speak briefly enough to enable the noble Lord, Lord Hughes, to catch the 11.35 to Edinburgh or to wherever he is going, and that he will not have to blame me if he misses his train. I am fortunate in that I am catching an aeroplane tomorrow morning. I could talk all night, but I will not. My Question may not seem to be of much moment compared to the great issues which concern the country today, but in my view it concerns justice to a small and remote community and is eminently worthy of your Lordships' attention. I hope to demonstrate this evening that upon the answer given by Her Majesty's Government may depend the survival of the island of Islay as a place where ordinary people can work and live.
§ The basic facts are simple. In April this year, Her Majesty's Government decided to grant a subsidy of £2½ million to Caledonian MacBrayne, a Government-owned concern, which is one of the two ferry operators to the island of Islay. It is estimated—and I apologise to those who know all about this already—or I have read, that Islay's share of this subsidy is in the region of £300,000 to £400,000. The rest of the money will be going to subsidise those routes to the other Hebridean islands on which Caledonian MacBrayne already have a monopoly. The other ferry operator on the Islay run is the privately-owned firm of Western Ferries, who are at present the major carrier to the island. Western Ferries have applied to the Government for a subsidy comparable to that given to MacBrayne; and so far this has been refused. In view of the Government's refusal, Western Ferries have given notice that they will take their ship off the Islay run in September.
§ Those are the bare facts but, above everything else and beyond the bare facts, we are concerned with the threat to the livelihood of every person who lives on the island. To put your Lordships briefly in the picture, the island of Islay 1680 is presently served by two ferry operators. Both operate from piers separated by five miles on the South side of West Loch Tarbert, and are 100 miles and 105 miles respectively from Glasgow. The crossing, whichever service one chooses, takes between 2 hours and 2½ hours. Effectively, Islay is at least twice as far from the Scottish mainland as Dover is from Calais, and as far from Glasgow—the centre of local government—as Dover is from Paris. Thus if your Lordships could picture Dover as an island with its centre of local government somewhere around Orleans or Tours, there would be a situation analogous to the situatiou which exists in Islay today.
§ The island has 4,000 inhabitants who get their living basically from whisky distilling, farming and tourism. There is also a fairly vigorous inshore fishing industry and a local clam factory. I was going to say what the whisky industry produces in excise every year, but as I asked a Question today and could not get an Answer from the Government, I can only say that a pamphlet produced by the Western Ferries says that the figure is £12 million. I have heard estimates of between £60 million and £120 million; so that I cannot tell your Lordships. The same estimate which I read said that it produced £6 million in exports.
§ On the island there are 16,000 breeding cattle and 24,000 breeding sheep and a large number of hotels, guest houses and other establishments. In view of the excise income and exports which Islay produces, I do not think it can be said that whatever subsidy is given to the services to the island can be a burden on the Exchequer. In fact, the situation is very much the other way round. If anybody is a burden, one could say that the Exchequer and the excise is a burden on Islay.
§ Transport has always been the principal difficulty for the island. For many years it suffered what I can only call one of the worst systems of communication in the Western world. Until 1968, MacBrayne—I think they were called David MacBrayne then—had a monopoly of the route and served the island with one boat a day on six days of the week. The boat was antiquated, slow and expensive. It was side-loading and all freight, including cars, had to be lifted 1681 on to the ship by a crane which for a driver could add three-quarters of an hour to the journey either way while he waited to have his car on- or off-loaded.
§ In 1968, all that was changed by the intervention of the private firm of Western Ferries with a drive-on/drive-off boat which operated three times a day seven days a week. They cut fares and also made a profit—a thing that MacBrayne's had almost forgotten how to do. MacBrayne's were then compelled by the logic of the situation—I do not know the exact date—to alter the boat on the Islay run to drive-on/drive-off and to cut their fares. It may seem extraordinary that it took Western Ferries to give MacBrayne's the idea of drive-on /drive-off which had been common practice in most parts of the world long before Western Ferries intervened. How much fares have been cut by is simply demonstrated. A Land Rover in 1961 cost £12 10s. to transport one way. Today the same car costs £9.50 return. That is inflation in reverse and something we should like to see. It is also an interesting fact that MacBrayne's fares were cut substantially only on the Islay run. It still costs today twice as much per sea miles to travel on the routes on which MacBrayne retain the monopoly.
§ There can be no doubt at all that the intervention of Western Ferries changed the quality of life in Islay almost beyond recognition. Articulated lorries could get across, food and commodity prices fell dramatically, commodities which had been impossible to get on the island became as available in Islay as they always had been on the mainland. The island started to thrive and to be prosperous as she had not been for many centuries. Is it any wonder that people view with growing alarm the possibility that MacBrayne's may once again have the monopoly on this run? The least that will happen if they do is that fares will probably double—or triple or may even quadruple, and I am taking the history of MacBrayne into account.
§ The result of the intervention of Western Ferries was simple and dramatic. The population of Islay has ceased to fall. The contrary is true of every other island in the Hebrides. I can only say the reason is that the island 1682 has the cheapest and most efficient ferry service in the Hebrides and all this is now at risk. I do not know whether or not I should say any more about MacBrayne's. Their history has been unfortunate, but we all know that there is joy in Heaven over the sinner that repenteth, and so there would be in the Hebrides if Caledonian MacBraynes were to be run more efficiently, and were they to make a profit. No one that I know on the Island of Islay wants MacBrayne to leave the route. The contrary is the case. They still perform an invaluable service and, were they to leave, Western Ferries would have a monopoly, possibly with the same result which took place when MacBrayne's had the monopoly.
§ I know the Government say they cannot subsidise competing services, but I do not see the reason for this. It is possibly an imperfect analogy, but the Government since the War have subsidised competing farmers. It is said by the Government that because there are two competing operators neither can get enough of the traffic to run economically. But we know there was a period when Western Ferries ran economically, and the prosperity of Islay has increased dramatically since the intervention of Western Ferries. Granted the continuance and improvement of the transport services to Islay, there is no reason why that prosperity should not continue to grow to the benefit of Islay, to the benefit of the whole community and the ferry operators, whose business should soon rise to a level where they will be able to operate more economically.
§ In my view it needs only an act of faith by the Government to tide over both operators in the present difficult period. I said that it is difficult to speak about Caledonian MacBrayne without being critical, but I should like to say briefly that I am not criticising the excellent and courteous crews and people on the docksides whom I know personally, many of whom are my friends. I do not think they are to blame at all for the inefficiently-run concern for which they work.
§ Briefly, to compare the two services, the new ship the "Pioneer" is a good one and runs from Portaskaig to Feolin. It cost three times as much as the Western Ferries "Sound of Jura", and costs twice as much to run. It has a crew 1683 three times larger and, on top of that, takes less freight and only a few more passengers. Some people find it hard to understand the Government's logic in supporting an inefficient operator to the obvious detriment of an efficient one. I very much welcome the maiden speech of the noble Viscount, Lord Astor, because nobody has thought of Jura and I am sure that from the noble Viscount we shall hear something about Jura. I wonder what will happen to that island should the Western Ferries pull out.
§ My Lords, I have been speaking for too long, but my Question is not related to the getting of money for a private firm which is looking for a "quick buck "at the taxpayers' expense. I have already demonstrated that the taxpayer is making a profit from Islay, anyway—probably an enormous profit. I am asking the Government—and I do not think I am exaggerating here—to consider the very continuance of human life on the island of Islay which has been inhabited since the dawn of our history. I do not think that it is too much to say that a refusal to act now by the Government, a refusal even to consider Western Ferries' request for a subsidy could possibly result in the distilleries having to close down, in farming becoming so expensive and uneconomic, in the fishing industry seeking other ports which are easier and more economic to use and tourism dying for lack of transport, or because transport becomes so expensive as to be prohibitive.
§ In short, I believe it could result in a catastrophic situation which will prove that a Labour Government are able to achieve what even the clearances were not able to achieve; that is, the death of Islay as a place for ordinary human habitation, and for habitation by any but the super rich. I ask Her Majesty's Government to consider seriously whether this is their objective in refusing to subsidise Western Ferries. My Lords, I cannot believe that it is.
§ 9.5 p.m.
My Lords, I rise with great trepidation to make my first speech in this House, though in choosing this debate perhaps it should be called a maiden voyage rather than a speech. I speak today as someone who has a vested interest in this debate—that is, I live on the Isle of Jura. For those to whom 1684 this means absolutely nothing, I must explain. Jura is an island next door to Islay and at its most southerly tip is only half a mile away. It is totally dependent on Islay for its communications with the mainland. It has no ferry service of its own, but has to rely on a small car ferry to Islay from where one can connect with ferries to the mainland. The island has a population of only about 200 people. Like Islay it has a distillery bringing in a large amount of revenue for the Government, and it earns a significant amount of foreign earnings from its sale abroad of venison.
For the past seven years, Jura and Islay have had one of the cheapest and most efficient ferry services in Scotland. This is now threatened. I do not want to reiterate all that the noble Lord, Lord Belhaven and Stenton, has said, but prior to 1968 the two islands was served by the MacBrayne ferry which sailed only once a day. It could carry only a limited amount of cargo, and a few cars which had to be lifted on board by a crane. En 1968 Western Ferries introduced a new roll-on/roll-off "car and lorry ferry to Islay. This was the first of its kind. It operated three times a day, seven days a week. It offered much lower rates than MacBrayne's without any subsidy. It was the first ferry to operate on a Sunday, and was so successful that a year later a larger ship was introduced to cope with increasing traffic. It was then possible to take one's car to the islands cheaply, which benefited tourism; but, more important, container lorries could now be used to take goods to and from Islay, cutting the costs of transport for the farmers and distillers.
Last year Caledonian MacBrayne introduced their new version of a "roll-on/roll-off "ferry. Their charges were lowered to compete with Western Ferries and they announced that they would operate without a subsidy. Their ship is much larger and faster than that of Western Ferries, but much more expensive. It has nine more crew and its route is longer. It is forced to make up time by travelling faster and using more fuel. So now we have two ferries competing on the same route, one supported by the Government, through the Scottish Transport Group, and the other a private company, but both charging the lowest fares per mile in Scotland.
1685 But due to increased costs, Western Ferries should now increase their charges in line with inflation. Caledonian MacBrayne have been granted a £2½ million subsidy to operate their ferry services. With this money they will be able to subsidise their Islay ferry and so force Western Ferries out of business. MacBraynes are not required by the Government to state how much money they allocate to each individual ferry service. Although they originally said they would operate the Islay route without a subsidy it is obvious that they are unable to do so. MacBraynes must be losing money on the Islay run. The fares on a per mile basis are half what they are on any other MacBrayne service. Even on the unlikely basis that they make money on this route, it would show that they are grossly overcharging on all their other routes and therefore need no subsidy at all. Obviously, competition has kept fares on this route below those of any other route in Scotland. This is now threatened.
If MacBraynes are given the subsidy Western Ferries will be unable to continue, and this will create a great deal of hardship for the people of Islay and Jura. The residents of Jura will have to travel an extra 25 miles across Islay to connect with MacBraynes ferry, incurring a longer journey and added expense. At the moment there is no proper bus route or any form of public transport. MacBraynes would not be able to operate to Port Askaig, on Islay, as Western Ferries do. There is no public pier suitable for docking their ships, so a large amount of money would have to be spent in making a suitable new pier. Even when the people of Jura, and Islay for that matter, manage to get to MacBraynes ferry they might not be sure of getting a place. During the busy summer months one operator would not be capable of carrying all the traffic. Far more important, one could foresee in a few years' time MacBraynes, with no competition, increasing their fares in line with their other routes; in other words, doubling them on the Islay run.
The question is, what should be done? If MacBraynes are given the subsidy the Government will have killed off a private enterprise and created another monopoly. The people of Islay and Jura would like 1686 to see a properly operated, efficient ferry charging the lowest possible fares. Western Ferries have proved in the past that they can do this as well, if not better than, MacBrayne. There is a strange tendency among Governments to believe that a Government-owned company is the only kind of company suited to operate any public service. In practice, private companies are publicly accountable by law and may be more forthcoming with information than are nationalised concerns.
I urge the Government not to grant this subsidy without looking at the alternatives. It must be desirable that both companies should be treated in the same way to keep up healthy competition which has kept fares as low as they are. There is room for both to operate together, to help each other and the community. Either no subsidy should be given—but of course this would mean that both companies would have to increase their fares—or each should be given a subsidy on their merits. A possible way of doing this would be to pay a grant to each based on the number of people and the traffic they carry. It is really nonsense to imagine, as many people do, that both cannot be subsidised to continue. I urge Her Majesty's Government to bring together both operators to work out how support can be given to keep both services operating. I thank the House for listening to my speech and I hope the situation will resolve itself so that I shall still be able to catch a ferry from Jura in order to enable me to attend your Lordships' House.
§ 9.12 p.m.
§ Lord TANLAW
My Lords, we must thank the noble Lord, Lord Belhaven and Stenton, for bringing our attention to this particular ferry service. Obviously something is wrong here. There has been concern in the islands and various letters which no doubt all of us have received from the Islay Transport Users' Committee and so on indicate that they are worried about the future of the service provided by Western Ferries. It was good to hear the noble Viscount in his maiden speech speak with such confidence and authority on this subject. I feel that he has made a very serious and helpful contribution to this debate. I liked very much his questions about the accountability of public services.
1687 It is really a question of the whale and the sprat. Western Ferries is a small and popular service doing a good job. It seems to be worried about the future mainly because its competitor, its only competitor on this short run, is the "Pioneer ", the ship provided by Caledonian MacBrayne. The "Sound of Jura" is a small private enterprise ship competing against all the mammoth facilities available in a public enterprise. That is what it sounds like and the case put forward by the Users' Association gives this impression. It is perhaps oversimplifying the question to say that it is simply a matter of cost per mile and who is to pay it.
Both these ferries, the "Pioneer" and the "Sound of Jura" are providing a service. But from the information I have received, it appears that the "Pioneer ", the Caledonian MacBrayne craft, appears to be over-manned, over-powered and under-utilised. This may or may not be true, but I have had some experience of running a similar ferry service in another country and the only thing that really matters is the load factor and the cost per mile. I feel that the situation could be very simply resolved. If Western Ferries did not increase their price and still provided a good service, fair enough; but with inflation they may be unable to do so. As I understand it, their complaint is that Caledonian MacBrayne will not increase their price to the level of Western Ferries because they are getting a subsidy from the British taxpayer and therefore running an uneconomic service at an uneconomic price.
I hope that the noble Lord the Minister will be able to resolve the problem very simply by giving us the equivalent cost per mile of the operation of the two ferries and saying whether or not it is the intention of Caledonian MacBrayne to pump money into" The Pioneer "operation if that operation is uneconomic; because the simple truth of the viability of these services can be seen only by means of proper accountability. Western Ferries' accounts are available to anybody who asks, presumably, and certainly to the shareholders. The accounts of Caledonian MacBrayne are not.
As I said earlier, there is obviously concern in the Island about the future of the ferry service, and I would ask the 1688 Minister to let us have a straightforward comparison of costs and load factors of the two ferry services. If we had those figures, the situation could be resolved in a sensible way very quickly, but if Western Ferries have to withdraw their services through "unfair competition "because their competitor's services are heavily subsidised by the taxpayer and they are therefore able to offer far lower fares, people in these islands are going to suffer simply because the services will be withdrawn. Also, as the noble Lord, Lord Belhaven, indicated, if Caledonian MacBrayne have a monopoly in this area, the prices will be doubled, if not trebled. There is no more to be said than that.
I have heard all sorts of descriptions given to the competition between the two services: in fact last night when I rang up a person whose home overlooks the Straits, they were compared with Oxford and Cambridge. It seems that the engines of "The Pioneer" have to be driven flat out if she is to compare with the "Sound of Jura" on time for the journey. This is all very dramatic, but something has to give, my Lords. A very small population is involved, and it seems to me that the ferry services need some form of guidance and attention and we need—indeed this is the point of the noble Lord's Question—some further elucidation on the comparative running costs of the services. So I hope that the noble Lord the Minister will be able to clarify the matter for us at the end of the debate. Meanwhile, I must say that if this particular worry is not resolved it could easily provide the basis of an entertaining story by some writer like Compton Mackenzie, who used material from that part of the world when he wrote Whiskey Galore. I can see that someone, somewhere, might produce an equally interesting story on the theme of public versus private enterprise in the Straits of Jura.
§ 9.18 p.m.
§ Lord STRATHCONA and MOUNT ROYAL
My Lords, I must begin by apologising to the noble Lord, Lord Belhaven and Stenton. For once, I overrated the loquacity of the Scottish lawyers and unfortunately missed the opening passage of his speech. The noble Lord has performed two services for us ibis evening. First, he has caused the noble Viscount, Lord Astor, to make his maiden speech in this discussion. I wel- 1689 come him as a neighbouring Islander and must congratulate him on an extremely informative, if perhaps not wholly nonpartisan maiden speech. I am sure we are very glad to see somebdy so young joining us, confident that we shall have him around for perhaps more years than many of us will be here to see.
I have known this service for many years. Indeed when I hear people talking about "The Pioneer", I am bound to say that I remember a splendid old steam-driven paddle steamer which used to he on this service. I think it is a pity that this debate has come on so late, because the second useful service performed for us by the noble Lord, Lord Belhaven, has been that in raising what looks rather like a parochial question, he has in fact raised a number of issues in trying to assess the relative merits of two systems and how best to deal with such a situation. A number of the issues which arise are of a very much wider application than merely to the Islay services. They apply to nearly all the island services around Scotland, and indeed to some of the air services as well.
The first thing we must think about is the level of charges. I believe there is a gathering momentum for the school of thought which deals with what I suppose might be called the Norwegian approach, in saying that these services are essentially to be regarded as extensions of the road system, and therefore that the level of charges which it is reasonable to exact from people using them should be based on comparable costs by road. This is where there is a sea link to inaccessible and remote parts of the country, where these charges can be regarded as comparable costs to those experienced by people on the mainland. This nearly always means that the services are going to be economically unviable. But it is just worth making the point, before people start to complain about this comparison, that even if the charges are made comparable with road charges, the people living in these areas still have to put up with a very much less convenient service and very much less frequent service. In the case of my own home, like many of the other small islands, we have three steamer services a week, so of course 1690 we regard Islay as rather well served in any case, whether or not one or other of their services is withdrawn.
Of course, MacBrayne is a West Coast institution and I suppose the favourite participator sport of the people who live up there may be described as "MacBrayne bashing". A good deal of this criticism is unfair and misdirected. They do a job—a very difficult and almost impossible job—and certainly not a job which can be done on an economic basis. It is fair, therefore, before one goes on to say that unfortunately they call down criticism on their heads, to pay tribute to the people who staff their ships and services. They are in my experience unfailingly courteous, helpful and good-natured. It seems to me all the more unfortunate, therefore, that the company leaves itself wide open to some of the criticisms we have heard levelled against it this evening.
There is one particular group which seems to me entirely legitimate. They have a habit of not publishing their schedules until so late in the year that people have already made, or have wanted to make, all their holiday reservations in the hotels and cottages in this part of the world; and I cannot believe that this is necessary. The schedules should be published at least by the New Year, when the steamer services affect the whole way in which the booking pattern is organised. Indeed, the same argument must apply to businesses operating in this part of the world. The other point which has come through from all noble Lords who have spoken this evening is the great reluctance that this company has to produce facts and figures. If a company or organisation is receiving £2½ million of public funds, it seems entirely reasonable that it should be asked to say where it is spending it. The very least information one would require is the direct costs and revenues on each of these services—they are totally distinct. We do not want them to be—and I fear this happens—deliberately loaded one way or the other by putting on overheads, which should be shown quite separately. I shall be surprised if the noble Lord, Lord Hughes, is able to produce for us cost figures, even though I have no doubt he is able to twist the arms of the Caledonian MacBrayne management rather more effectively than 1691 I have been. Many of us have tried for many years to get figures out of them.
I may add that the same goes for the Post Office. I have never been able to discover how the mail contracts are allocated, or whether indeed they are allocated, as between one service and another, so that one can assess the various possibilities for operating each of these services. I am reluctant to arrive at the rather unworthy conclusion that these managements are so incompetent that figures simply do not exist. However, if they contiue to decline to produce them, one is bound to assume the worst.
This leads me to make a suggestion. Would it not be possible to allocate these subsidies for services of this kind on some sort of tender basis? Once the need for a general service is established, could we not detail the amenities, the terminals and the equipment to be used? Then could we not ask the organisations concerned to say how much subsidy they will require to operate a service of a given quality and frequency? I would suggest that any company which is in receipt of a subsidy should then show annually all its revenues and income against its direct costs, and that separately it should show the overheads and the depreciation which have been allocated against that particular service. Then, in order to maintain a fresh outlook, keenness and the possibility of introducing new services, could we not say that every five or seven years the whole question should be re-examined and that the possibility of reallocating the services or establishing a different type of service should be considered?
If we may return to the issue which is before us this evening, it seems to me that a formidable case has been made. Is it not a possibility that if, indeed, it is established that they are using a subsidy on this service—and so far as I know this has never yet been established beyond peradventure—the subsidy that we are giving to Caledonian MacBrayne in this instance is a waste of public money? Once again, therefore, the first step must be to insist that the company produce proper costings of their activities on this run. There is no doubt that Western Ferries have run a popular service in a fresh, new, interesting and, indeed, very convenient way.
1692 They have shown the possibilities of this type of service with the roll-on/roll-off ferry which has now been very widely adopted. I believe I am right in saying that the effect has been to make this one of the lowest cost runs per mile of any of the ferries on the West Coast. I rely on MacBraynes and have no wish to be rude about them. They are a splendid West Coast institution, and if they are as efficient as they always claim to be when you write to them I suggest that they would have nothing to fear by having their results compared against the results of Western Ferries. This is what I should like to see happen.
§ 9.29 p.m.
§ Lord HUGHES
My Lords, I would be insincere if I began by saying that I am grateful to the noble Lord, Lord Belhaven and Stenton, for having brought this Question before the House. I would be insincere because I shall not be giving any of the noble Lords who have taken part in this discussion the answer that they want. Therefore, I cannot be grateful to anybody for putting me in that position. However, I am grateful to the noble Lord for having confined his remarks to an extent which makes it quite certain that the only person who can now stop me from catching my train is myself, and that I have no intention of doing! When the noble Lord said that he was catching a 'plane in the morning I had a momentary fear that he would stop here all night and I wondered what would have happened if I had intervened at that point to say, "If you do I shall not be here to answer you".
Generally speaking, the position has been fairly stated, given the points of view of the noble Lords concerned, although I thought that perhaps in keeping with the need to compete with his friends in another place the noble Lord, Lord Belhaven and Stenton, as the Scottish National Party in this House, indulged in a certain degree of exaggeration, to which of course the noble Lord, Lord Campbell of Croy, would perhaps interject that this is what we are entitled to expect from that Party.
That is as far as I wish to go on the controversial note, but speaking of controversy brings me to the maiden speech of the noble Viscount, Lord Astor. It was an admirable speech and I do not think it was at all marred by the fact that 1693 he did not strictly adhere to the need to be non-controversial. In fact he was only non-controversial to the extent that I am the one who is disagreeing with him. So far as everybody else is concerned there was no controversy about it at all. Notwithstanding the difficulties of the ferry service, I hope he will find it possible to be here frequently and that he will favour us often with his contributions to debate, whether I find them controversial or otherwise. It is a very special pleasure to note that not everything in the world is wholly bad; one of the advantages of the hereditary system is that it enables people of the age of the noble Viscount and my noble friend Lord Melchett to remove the impression that this institution is merely an extension of a geriatric ward.
My Lords, my right honourable friend the Secretary of State recently reviewed the arrangements for the support of the shipping services to the Scottish Islands, principally in relation to the finances of the Scottish Transport Group's two shipping subsidiaries, Caledonian MacBrayne and David MacBrayne. He announced his intention on 16th April of making financial support available for the services provided by Caledonian MacBrayne Limited. These, of course, were not only to the island of Islay. It will be recalled that David MacBrayne Limited serves those islands which are too small and remote for services for them to come anywhere near financial liability and these services have always been supported by the Government. The payment in 1974 was £746,000 which was about twice the revenue that the services produced.
When Caledonian MacBrayne was established as a separate company it was the intention that its services should meet their costs and should to that extent be operated on a commercial basis. For various reasons that aim has not been realised and the company needed either a substantial increase in charges or financial support from outside, or a combination of these. My right honourable friend concluded that the Caledonian MacBrayne services could not in the immediate future pay their way without an increase in charges to a level which he thought would be generally regarded as unacceptable, since an increase in the order of 65 per cent. would have been necessary. He therefore decided to pay 1694 a new annual grant in respect of these hitherto unsubsidised services, which is expected to amount to about £2.5 million in respect of the company's 1975 financial year. In addition charges were increased on all the Scottish Transport Group shipping services so as to bring in a little over 17 per cent. of extra revenue. That is 17 per cent. against a non-subsidised need for an increase of 65 per cent. To minimise the effect of the increase in shipping charges on economic activity in the islands the increase for commercial vehicles was restricted to 5 per cent., though for private cars it was 25 per cent.
In deciding to introduce this new grant for the operation of these services, my right honourable friend considered the position of Islay, as both Caledonian MacBrayne and Western Ferries, which is a private company, provide services to that island. He decided that it would not be appropriate for him to exclude Caledonian MacBrayne's Islay service from the general arrangements he was making.
The first reason was that the grant to Caledonian MacBrayne is for its services as a whole and its main purpose is to prevent fares from rising to an unacceptably high level over the whole range of the company's services. Secondly, he had in mind the fact that the Scottish Transport Group has in effect a public service obligation in respect of its shipping services on the Clyde and to the Western Isles. This was reinforced in the case of Islay in 1972, when in the interests of rationalisation the Scottish Transport Group decided that it would be better to withdraw and leave the field to Western Ferries. Following a hearing, the Transport Users' Consultative Committee for Scotland, which received a large number of representations against the withdrawal, recommended that the MacBrayne service to Islay should continue. This recommendation was accepted by the then Secretary of State, the noble Lord who is now whispering to the noble Lord, Lord Strathcona and Mount Royal.
Following the announcement of my right honourable friend's decision, a good number of representations have been received by the Scottish Office, asking that subsidy should be extended to the Western Ferries service also. Our feeling is that it would not be a sensible 1695 proposition to pay Government subsidy to two competing services, even though the existence of those services has led to undoubted benefits to the people of Islay in the form of a carrying capacity larger than that enjoyed by other islands.
It should be remembered that this Islay business is not something which started with my right honourable friend's decision to include MacBrayne's Islay services in the subsidy arrangements he was making. This is but one further episode in a matter with a history going back several years. It was certainly not the intention that the arrangement for subsidy to Caledonian MacBrayne, which was meant to benefit the islands as a whole, and has been generally welcomed, should lead to Western Ferries' withdrawal, but since they are a private firm the decision is one for them alone in the light of all the circumstances affecting their business.
§ Lord STRATHCONA and MOUNT ROYAL
My Lords, may I interrupt the noble Lord for one moment? I am in slight confusion about what he calls the new grant of £2½ Is this on top of the old subsidy which MacBrayne's have historically always received; and are we to understand, therefore, that the total grant being received by MacBrayne is in two parts and is in excess of £2½ million?
§ Lord HUGHES
Yes, my Lords. The figure which I mentioned of £746,000 was the amount of subsidy given to David MacBrayne in 1974 in respect of their services to the small islands, which everyone accepts can never be viable and which can be continued only on the basis of being subsidised. On the figures I gave, if my arithmetic is right, about two-thirds of the cost of those services comes from subsidy and only one-third comes from the fares collected. As I said, when Caledonian MacBrayne, the other company, was set up it was the intention that that would be a wholly commercial proposition, and the experience of the last year has been such that we have accepted that if the original concept was maintained the fares would have had to be increased by a figure which the Government agreed was wholly unacceptable. The alternative, therefore, was to introduce this new subsidy, which is expected to amount in this financial year to £2½ million. I would suspect, therefore, that the total subsidy to the two companies 1696 will be £2½ million, plus a figure for the other islands, which is not likely to be less than the amount which had to be paid in the year 1974.
If I may turn to some of the points made during the discussion, the noble Lord, Lord Belhaven, in bolstering up rather needlessly what could be a reasonable case to put forward, went back into the rather dim and distant history of MacBrayne's services. As the noble Lord, Lord Strathcona, has said, there is no more universal sport in the Highlands than MacBrayne bashing, and the noble Lord, Lord Belhaven, made it quite clear he was prepared to join in that. But he, at least, ought not to have gone back before the present operators, because in the period which he talked about MacBrayne had a different management altogether. At that time it had the advantage, if one could so call it, of being 50 per cent. in private ownership. It was only in 1969 that the Scottish Transport Group was set up. So the improvements in the type of vessel which became possible after that were something quite different from the circumstances to which the noble Lord referred.
Lord BELHAVEN and STENTON
My Lords, I am not arguing private enterprise against State control. Whether it was called MacBrayne, or David MacBrayne, or something MacBrayne, it was still a monopoly, and that was the point. Pre-1968 we had a monopoly, whether State owned or privately owned, or owned by whomsoever.
§ Lord HUGHES
My Lords, I am dealing with the point where the noble Lord was comparing the situation that exists today with the improvements that have been made, and implying that it was only because Western Ferries appeared on the scene that this happened. It was not. It was because a completely new operation was set up by the creation of the Scottish Transport Group, whereas hitherto what could be spent on the route obviously had to be covered by what the privately owned half of the concern could afford to carry in losses. Eventually we know that they sold out to the Scottish Transport Group.
The noble Viscount, Lord Astor—and the noble Lord, Lord Belhaven and 1697 Stenton, anticipated what the noble Viscount would say—referred to the service from Jura. So far as I know, the service between Jura and Islay is also operated by Western Ferries. I do not know what they intend to do, but they certainly have not indicated that they are proposing to withdraw their connection between the islands. That may of course be influenced by the fact that in this case they do not operate the service without a subsidy, because they receive a subsidy of aproximately £20,000 a year from the Strathclyde Region, and, having regard to the incidence of rate support grant, the Chancellor of the Exchequer is picking up the biggest part of that contribution. So subsidy in this part of the world is not confined to the State enterprises; it is given, where the service is being provided only by Western Ferries, to Western Ferries on the basis that it is reasonable to support a necessary service which cannot be viable. But I do not think that it is reasonable to extend from the need for supporting the services which are the only ones that can be provided, to double up a subsidy to enable two concerns to compete with each other. These are the reasons why the Secretary of State has felt unable to provide a subsidy to Western Ferries.
The noble Lord, Lord Strathcona, raised a point about the Norwegian basis of considering it equal to the road equivalent. This has been considered by successive Secretaries of State. One of the odd things about politics in Scotland is that although we disagree violently on certain things, Secretaries of State nearly always come to the same conclusion about the services to the islands. These conclusions are twofold: One, that they have to be subsidised very substantially; and, secondly, that this must not be turned into an open hand into the public purse, which is what the Norwegian experiment would do. What may be suitable for them is certainly not suitable in our circumstances. The cost to the Exchequer, if we were to do it in that way, would be very high. It is estimated that it would mean that three-quarters of the cost of operating the services would be a direct charge on the Exchequer. I do not want to be offensive, but given the way of life in parts of Scotland—and the Islands are not exceptions to it—where 1698 it is felt that the maximum use of what used always to be called the "subsidies "was a legitimate way of life, we ought not to open this too wide.
The noble Lord, Lord Belhaven and Stenton, did not see why we should not be subsidising competing services, because, he said, we subsidise farmers who are competing with each other. One point on which I am wholeheartedly in agreement with the Farmers' Unions both in this country and North of the Border is the fact that the system of payments is not in respect of subsidies to farmers. They are payments to keep down the cost of the end product to the consumer, while enabling the farmer to get a reasonable return for the work he puts in. So it is not quite the same thing. Thus, I think it would be totally unreasonable to have people being subsidised against each other.
I recognise that this Answer will be totally unacceptable to the noble Lord, Lord Belhaven and Stenton, and I am sorry about that because I was rather interested in the views he put forward. He does not normally follow the line which his colleagues along the corridor take and he has not done so tonight. I had the impression from his remarks that, far from needing a separate Scottish Government to solve the problems of Islay, prosperity would be guaranteed and the island's future would be brighter than it has ever been, possibly since its population started, if only the Western Ferries service could be given a subsidy. I wish that the Party as a whole thought that the problems of Scotland generally could be solved in so simple a fashion. Unfortunately, however, that is not the simple solution here either.
Naturally, MacBrayne would have to review the pattern of its services if, as a result of all this, Western Ferries decided to withdraw from the Islay route, because it would have to ensure that the island's needs were met in the most effective and economic way possible in the new situation. I emphasise that the Secretary of State will, of course, continue to exercise general oversight over the level of future fare increases on Caledonian MacBrayne services as a whole.
I was asked about the provision of detailed information. Caledonian MacBrayne's accounts are, of course, laid 1699 before Parliament, but they are not broken up into individual routes and services. It must be obvious that in a service of this kind some services probably have to be subsidised to a very much greater extent than others. If we did give a breakdown of these figures, we would almost certainly have the people whose routes were receiving a comparatively small subsidy asking that the subsidy on their routes should be brought up to the level of the high ones, and that therefore their fares should be reduced, and vice-versa. So the Government stand to lose all ways round if they break these figures down into the individual routes. I am not sure that Western Ferries break up their accounts. They put their accounts in as required by company law—
§ Lord STRATHCONA and MOUNT ROYAL
My Lords, I have here a little booklet put out by Western Ferries, giving their break-down of the costs on this service, and their guess as to MacBrayne's figures.
§ Lord HUGHES
My Lords, are those the figures which would appear in the accounts which are submitted to the Registrar of Companies?
§ Lord STRATHCONA and MOUNT ROYAL
My Lords, I do not know whether these figures are in their accounts, but they are certainly published, because I have the booklet here.
§ Lord HUGHES
Yes, my Lords, but the accounts go into the Registrar of Companies in the ordinary way of commercial practice. This is a propaganda document in connection with this exercise, and the two are not necessarily the same thing. But I think I can say with certainty that it would not be possible for people to disprove or challenge these, other than to the extent to which, in talking about MacBrayne's, they are hypothetical. I am sorry that I cannot give a more satisfactory Answer to those noble Lords who have taken part in the debate. My noble friend Lord Davies of Leek who apparently has journeyed on more than one occasion to these parts, has told me that when next he goes to Islay and the people ask whether he knows Hughes, he will say that he has never heard of me.