Legal issues may stand in way of plan to scrap ferry owners CMAL

It comes after net zero secretary Mairi McAllan confirmed the Scottish Government would consider a merger as a potential solution to ongoing considerations of how to structure Scotland's ferry service structure.

The Holyrood transport committee supported the scrapping of the Scottish Government-controlled ferry and port owner CMAL to create a new ferries agency.

The committee, which was examining the future of ferries in an inquiry, said that the current 'tripartite' arrangement over control of ferries "is not working and must be reviewed" while suggesting that there should be a merger of CMAL and the ferries wing of the Scottish Government agency Transport Scotland.

But it has emerged EY, which was tasked by by ministers to look into the future of Scotland's ferry service structure has previously informed ministers of issues surrounding the option rating it as a "negative" meaning it was "unlikely to achieve best value".

The merger would involve all CMAL staff and assets such as the harbours and the vessels becoming an arm of Transport Scotland - under a new Ferries Scotland banner.

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But the EY options analysis said there were a "significant number of legal issues that may prevent delivery".

It said the transfer of CMAL staff and vessels was "likely to be complex with significant accounting, tax, pension and HR (Human Resources) implications".

It said that the transfer of vessels and harbours to the new body would be deemed to transfer at a market value which may give rise to "chargeable gains" that may be payable.

Chargeable gains relate to the rise in the value of assets such as the ferries and the harbours between the time they were bought and the time they are sold which becomes subject to capital gains tax.

It said that there were "significant" considerations around the TUPE ( the Transfer of Undertakings Protection of Employment) - the law that protects employees, and their benefits, when their employment changes hands. Transfer of the assets such as vessels and harbours were also seen to be a "significant" consideration.

It said that a simplified structure "may enhance accountability and transparency" but it also said there was "limited reason to believe passenger experience will be materially improved, especially if CMAL’s capabilities are weakened" during the process.

According to a Scottish Government response to the Ferries Scotland recommendation said that the "lawfulness of a merger cannot be properly assessed in the abstract or at a high level."

It continued: "This is a matter that can only be meaningfully considered in the context of detailed proposed reforms and with a clear understanding of the policy and delivery objectives being pursued by those reforms."

The Competition and Markets Authority has previously expressed concern about the "potential risks" of state control over the way ferries are operated, run and paid for.

There has been concern that the service is "cocooned" inside four levels of Scottish Government control with the Transport Scotland agency as funders, the procuring, vessel and harbour owning company CMAL, the ferry operators Calmac and the nationalised shipbuilders Ferguson Marine (Port Glasgow).

It comes as transport minister Fiona Hyslop told MSPs at the Scottish Parliament's transport committee that the prospect of a merger was "absolutely live and a active in terms of my consideration.

A public consultation analysis produced by the Ferries Community Board for the Scottish Government suggested that both Scottish Government-owned CalMac and CMAL should be scrapped and merged into one body to become more efficient and produce financial savings as part of a revolutionary culture change in the way lifeline services are provided by ferries.

READ MORE: Scots ministers urged to lift secrecy over ferry millions

A ferry user group official said that the plan for merge was in danger of becoming "half-baked".

"The message from communities has been that there should be a more fundamental change, merging the operator and CMAL with a strong case for it to include the ferries division of Transport Scotland.

"There is a clear need for greater change which does not appear to be being looked at.

"While there may be legal concerns, these have to be ironed out if we are not to have more of the same failings over lifeline ferry services.   There needs to be change to bring to an end the lack of strategy and failure in joined-up thinking."

The transport committee, which has been examining the future of ferries in an inquiry, said that consideration should be given to CMAL and Transport Scotland being merged which "could streamline decision-taking and improve the understanding and importance of ferry services" within the Scottish Government agency.

While suggesting the merger, the inquiry report said that the current tripartite arrangement over control of ferries "is not working and must be reviewed".

It also said that state-owned ferry operator CalMac should benefit from a direct award of an extended ten-year rather than the current eight-year contract to run lifeline services on the west coast of Scotland.

A Transport Scotland spokesman said: “No decision has been taken yet on structural reform. Future outcomes will consider options for change in the round, taking into account the views of island communities, Parliament and ferry users, but also ensuring that value for money and the public purse are considered. Ministers intend to provide an update to parliament on this subject later this year.”

A CMAL spokesman said: “CMAL is firmly focussed on the delivery of six new major vessels by the end of 2025, as well as getting the small vessel replacement programme (SVRP) underway before the end of this calendar year. The SVRP will see seven smaller “loch class” vessels delivered in the first phase, and three more in the second phase, meaning 50% of the Clyde & Hebrides Ferry Service will be renewed prior to the end of the decade. This will bring the average age of the fleet to below 15 years.”