Scottish Islands (Shipping Services) (Hansard, 28 July 1981)

§ Mr. Younger

The Government are committed to the survival and prosperity of the Scottish island communities, and recognise that the cost of sea transport to the islands is an important factor.

Since taking office the Government have increased the total assistance to Scottish shipping services from £4.3 million in 1979–80 to around £9.5 million in 1981–82. This increased assistance has restricted the increases in charges which would otherwise have been necessary on Caledonian MacBrayne's West Coast services, and on the services of the Orkney Islands Shipping Company. It has also enabled the introduction of substantial rebates on charges on the main P and O services to Orkney and Shetland, and on almost all bulk cargoes to the Scottish islands. These arrangements have been widely welcomed by local industry and commercial interests.

We issued in March 1980 a consultative paper on the structure of assistance to island shipping services This examined the implications of moving towards an operating cost RET system of charges. Responses have stressed the importance of sea transport costs to the islands' economies and agree that these should be lower. A number of responses, in particular those from Strathclyde regional council, Western Isles islands council and Shetland islands council, suggested that any strict application of RET would lead to a disproportionate and indeed inappropriate amount of any extra aid going to the shorter ferry crossings. There was also a preference for an RET system based on running costs rather than operating costs.

My hon. Friend the Under-Secretary of State visited Norway late last year to examine its ferry charging policy. We are grateful for the kindness and courtesy which was extended on that occasion. It is clear that, although Norway has a standard, mileage-related tariff for shipping fares—which is very low—this is not a road equivalent tariff since it does not relate to vehicle operating or running costs. The Norwegians do not have a ready-made charging formula which could be considered for application to Scotland.

The responses to the consultative document suggest a need for a system of distributing assistance which is more flexible and more easily understood than the present arrangements. The Government stand by their manifesto pledge to move towards RET. For expenditure reasons, changes will inevitably depend on the extent to which additional resources can be made available over the years ahead.

The Government accept that they should aim for the adoption of running costs RET as opposed to operating costs RET. This is the logical system since the haulier continues to have to bear standing charges during the vehicle's transport by sea.

A number of responses from the more remote islands pointed out that a rigid applicaton of RET to the longer sea routes would produce higher fares than those now being paid. It is therefore the Government's intention to modify the RET principle for the longer routes to take this into account.

To provide for running costs RET on the basis outlined in this statement Government financial assistance would have to be doubled. This is clearly not possible at the present time and it will therefore, be necessary to phase in any increases. We therefore aim to introduce a system from the 1982–83 financial year leading towards an RET basis for charges and distribution of assistance among the Scottish routes.

391W

The Government consider that local interest can be brought to bear on decisions on which traffic should receive the benefits. It is therefore our intention, after discussion with Caledonian MacBrayne, to enter into a new undertaking with that company so that grants may be made on the basis of groups of routes. The company would be expected to continue to consult its advisory committees, which consist of representatives of local interests, on the necessary changes to its fares structure in the forthcoming year. We intend to ensure that the company, within its general need to obtain sufficient revenue from a particular group of routes, takes the committee's view into account in deciding on actual rates.

On the Northern Isles routes, there already exists a system of consultation with the local interests to decide on the application of a fixed level of Government aid. Under the new arrangements the total amount available for the Northern Isles will be decided on the same basis as on the West Coast and the existing arrangements for discussions will continue.

These proposed new arrangements will be the subject of further consultation with interested parties and I propose to make a further statement after the recess giving details of how the new system will operate.