CalMac gets 63% real terms public subsidy rise despite drop

State-owned ferry operator CalMac which provides lifeline services to Scotland's islands has seen an over 60% real terms increase in its public subsidy since it first won the islands contract 16 years ago.

An examination of the funding of state-owned ferry operator shows that real terms subsidy levels since 2008 have shot up by £67m while the number of passengers carried has dropped by 12% (680,000), the Herald can reveal.

It is understood that there has been a seven-fold rise in Scottish Government support in the half century since Caledonian MacBrayne Ltd was formed in 1973.

Since 2008, the first full year of trading after a restructured CalMac won a six-year contract when the Clyde and Hebrides lifeline island services went out to tender the subsidy, taking into account inflation, has shot up by 63%.

Then the grant to CalMac was at £68.541m which equates to £106.09m at 2023 prices.

And in 2022/23 that has risen to £173.03m – a £19m leap in the space of just one year.

But since 2008, the number of passengers being carried by CalMac has dropped from 5.7m to 5.02m.

Roy Pedersen, former member of the disbanded Scottish Government expert ferry group who has told Holyrood in a submission that policy over lifelines services was “manifestly dysfunctional” and must be overhauled said the services are not value for taxpayer money.

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He says that an original requirement that CalMac is self-funding had been found to be "in vain".

The idea, he said, was that profitable services would cross-subsidise those that were loss making.

And by 1975, a deficit of £3.25 million was posted which was met by government subvention, which has been the case every year since then. That equates to £24.148m in 2022/23 prices.

He said subsidies had risen "inexorably" since then and for some time there have been no profitable services.

The author said the main reason for the "disproportionate" increase in state funding is the high cost of operating the larger “major” vessels of the fleet.

He pointed to flaws in past policy including the sinking of an £800m scheme to create a Clyde shipbuilding revolution and solve Scotland's ferry crisis with a fleet of 50 catamarans.

Fronted by Stuart Ballantyne, a Scottish naval architect and chairman of Australian marine consulting firm Sea Transport Solutions, whose designs are used in around 50 countries, the Clyde Catamaran Group had meetings with ministers over the new ferries built over 20 years in Scotland that would cost a fraction of those currently being built.

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When revealed, it was asserted that the sunk project for 50 catamaran ferries for use by Scottish Government-owned ferry operator CalMac for the lifeline island services off the west coast of Scotland and for services to Orkney and Shetland would cost just £250m more than it would cost to build four in Turkey and at Ferguson Marine in Scotland.

It would also be an alternative to the over £400m that is expected to be blown on the two ferries still being built at nationalised Ferguson Marine which have been wildly delayed by over six years. The contract for the ferries was set at £97m.

He said: "The main physical problem is overly complex, inefficient and labour-intensive ships and terminals and in a number of cases operating on longer routes than need be. This is exacerbated by the current entrenched and mutually-reinforcing attitudes within the vested interests that control the current byzantine and dysfunctional system, which seems to be oblivious to the concept of value for money."

He said that Kevin Hobbs, chief executive of state-owned ferry owners and procurers Caledonian Maritime Assets Limited (CMAL) claimed that his stance has over-simplified matters.

"I would respond with the oft quoted adage that, 'if there is an expensive and awkward way of doing things, CMAL will do that'.

"He claimed that building new terminals (to enable shorter routes) would be very expensive, Well, yes, if CMAL were to do it, but not if done by more cost-effective operators. Whereas the new CMAL specified Brodick terminal cost £30m (and is so badly orientated that it is untenable in a strong easterly), Pentland Ferries’ two terminals cost around £2 million each."

The former official with Highlands and Islands Development Board and its successor, Highlands and Islands Enterprise has been calling for the adoption of a Norwegian model' for ferries based on shortest feasible sea crossings using ferries with minimal “live-ashore” crewing and high frequency schedules.

He condemns the “appallingly poor productivity of CalMac/CMAL” and criticises “inconvenient schedules, limited capacity and unreliability, combined with very high levels of public subsidy”.

The Scottish Government is looking at giving CalMac the right to operate west coast island ferry services into perpetuity despite receiving some £10.5m in poor performance fines in the six-and-a-half years since CalMac took the franchise – nearly eight times more than in its first nine years in charge of the west coast fleet.

A spokesman for CMAL said: “CMAL remains focussed on delivering a robust ferry service for island communities. An important factor in all vessel choice for the Clyde and Hebrides Ferry Service (CHFS) is compatibility with specific routes, as well as flexibility to meet vessel redeployment needs across the network. The four vessels being built at Cemre to serve the Islay and Little Minch routes have been built to a standardised specification to ensure this flexibility."

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A Transport Scotland spokesman said: “The Scottish Government is investing in our ferry services and delivering six new major vessels to serve Scotland’s ferry network by 2026. We have invested more than £2 billion in our ferry services since 2007 and have outlined plans to invest around £700 million in a five year plan to improve ferry infrastructure and benefit our island communities.

“We have been clear that CalMac is managing the challenges of an ageing fleet. This means they are investing additional sums to improve fleet sustainability and to provide a more resilient service for customers and communities. However, the rise in subsidy they receive from government is down to a number of reasons, including additional routes and services, lower fares, the purchase of the MV Loch Frisa and the charter of the MV Alfred, and not just maintenance alone.”

CalMac declined to comment.