§ Mr. GallieTo ask the Secretary of State for Scotland if he will make a statement on his decision following the shipping subsidies review in relation to shipping services on the west coast of Scotland.
§ Mr. LangAfter very careful and detailed consideration, I have concluded that tariff rebate subsidies on bulk freight to and from the west coast of Scotland should be progressively withdrawn. In order to avoid the possibility of immediate freight rate increases affecting commodities of significance for island residents, I intend to phase out the payment of TRS on some commodities over a period of three years. The TRS rate is currently 40 per cent. for imports to the Western Isles and 30 per cent. for exports from the Western Isles. As from 1 May 1995, I intend to set both rates at 30 per cent. followed by annual reductions to 20 per cent., 10 per cent. and zero from the beginning of each subsequent financial year. The tapering of subsidy over three years should provide existing companies with the opportunity to consolidate their market position, and make efficiency improvements, while at the same time enabling other companies to become increasingly competitive with those companies whose subsidy is reducing. I would expect to see a competitive market develop which would act as a constraint on freight rate increases.
I have, however, concluded that there is scope for the exclusion of certain commodities from being eligible for TRS in a shorter period. As from 1 September 1995 the transport of raw timber, quarry products and road salt will no longer be eligible to receive TRS.
I do not consider that the export of primary commodities requires continued subsidy. There are currently very substantial amounts of timber being extracted from the west coast of Scotland and forestry extraction is expected to more than double over the next 480W 15 years. The shipping market needs to adjust to the scale of these operations; and I believe that continuation of TRS on timber is unnecessary and would distort the market. Quarry products and road salt currently receive a lower rate of subsidy than generally available. Given the low amount of subsidy currently payable on these commodities, I would expect efficiency savings to restrain any price increase.
After consideration of representations received, I have been persuaded by the evidence put to me, that in relation to movements of fishmeal and fish oil from Shetland, complete withdrawal of subsidy on 1 May would be likely to have significant adverse effects on the industry; and that a period of adjustment is required. I have concluded that subsidy should be retained; and set, with effect from 1 May, at a rate of 30 per cent., followed by reductions to 20 per cent., 10 per cent. and zero from the beginning of each subsequent financial year.
§ Mr. StewartTo ask the Secretary of State for Scotland what proposals he has for shipping subsidies for sea transport services in the highlands and islands other than those provided by Caledonian MacBrayne; and if he will make a statement.
§ Mr. LangSubject to parliamentary approval of the estimates, I propose to make available in 1995–96 total subsidy provision under the tariff rebate subsidy scheme of £9.1 million. For services to Orkney and Shetland, tariff rebate subsidies of up to £8.3 million will be made available, and up to £800,000 will be available for bulk shippers operating on the west coast of Scotland and to and from the Northern Isles.
The provision includes subsidy of up to £7.6 million to P and O Scottish Ferries Ltd. for the operation of passenger and accompanied car services for the year to 31 March 1996 and for freight services to 30 April 1995. As previously announced, I intend subject to the approval of Parliament and of the European Commission, to change the method of subsidy for passenger and accompanied car services to a block grant payable over a period of years in accordance with a contract to operate a specified level of service. I propose in due course to put the service out to competitive tender.