£185m-a-year Scots ferry subsidy 'should be better deployed'

But it has further emerged that an analysis of 394 responses to an inquiry into what constitutes a modern and sustainable ferry service for Scotland has revealed the majority felt that there should be a rethink on government subsidies.

When asked if Scottish Government subsidies would be better deployed to meet the needs of current and future ferry users, most said "yes".

Changes suggested included a requirement for subsidy on certain popular routes. Some asked whether private sector operators could provide such services without the need for any subsidy.

The Scottish Government's Transport Scotland agency pumped £185.5m of subsidies in 2021/22 for the provision of ferry services to serve communities on the Clyde and Hebrides and Northern Isles Ferry networks.

But the "overwhelming" majority of those responding felt that current services are not providing best value for the taxpayer.

"Many pointed to the decline in service reliability and quality experienced by ferry users in recent years," an official study of responses said.

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"Much of this decline is attributed to the increasing age of ferry fleets, leading to a growth in mechanical failures and cancellations, and the failure to secure new vessels that meet the needs of users."

Some said procurement arrangements for new ferries should be reviewed, to ensure vessels both meet the needs of users and provide value for money.

Many of the respondents said that arrangements for tendering for the lifeline ferry service contracts could be improved arguing that the current breakdown in service provision and problems in vessel procurement meant that existing arrangements were not good enough.

Amongst those who described favoured alternatives, many pointed towards the Norwegian model of competitive tendering of individual, or small groups of, services.

"This was felt to offer the opportunity for greater innovation, tailoring of services to meet local needs and even the opportunity for local communities to bid to operate their own ferry service," said the analysis.

"Several respondents were keen to dispute claims that the current bundling of services provides economies of scale, cross subsidy of less profitable routes or the maintenance of relief vessels to cope with disruption – as there was no evidence of any of these happening at present.

"Opposition to unbundling was expressed by a small number of respondents, who raised concerns that private sector operators could cherry pick more attractive or profitable routes. This could leave uneconomic and loss-making routes in the hands of the public sector, increasing the level of subsidy required for their continued operation as cross-subsidy would no longer be possible."

The concerns surfaced in a parliamentary call for views progressed as part of an inquiry into what constitutes a modern and sustainable ferry service for Scotland.

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The net zero, energy and transport committee launched its inquiry in June 2022 with the aim of seeking out how best to secure a state-funded ferry service that is future proofed, compatible with Scotland’s net zero goals and meets the needs of all service users, having regard in particular to the long-term sustainability of island communities.

The committee took evidence from island ferry users, independent ferry operators, business and tourism representatives and trade unions. Members have also embarked upon fact-finding visits to Arran, Orkney and the Western Isles. An official analysis of the responses said that the evidence reveals that short-notice service cancellations and the impact this is having on many aspects of life in island and remote rural communities, were "central" to concerns.

The analysis said: "Respondents were effectively unanimous that service reliability is the key attribute they want to see from ferry services across the short, medium, and long term. Many respondents were clear that reliability can only be delivered by a resilient service, which can cope with natural disruption such as extreme weather events, as well as mechanical breakdowns and staff absences.

"In the short term, many respondents argued that this reliability could only be delivered by chartering or buying additional vessels to supplement existing fleets. These vessels should be able to provide a service, whether through vessel size, cabin design or frequency of sailing, which can cope with peaks in demand.

"Over the medium to longer term, many argued that reliability could be delivered through a planned, fully funded, rolling programme of vessel replacement and, where appropriate, the development of fixed links such as bridges and tunnels."

Some said the road equivalent tariff (RET), which sets fares to the equivalent cost for travelling the distance by road, should be reviewed as the growth in ferry usage it has encouraged - particularly by tourists - had not been accompanied by an increase in carrying capacity.

This meant islanders, or people living in remote mainland communities, often cannot access services at short notice during peak times.

Some respondents suggested that RET fares - or some other form of discount - should only be available to islanders and people living in remote mainland communities.

Minister for Transport Jenny Gilruth said: “I recognise many of the concerns raised in the Committee’s report from our own regular engagement with islanders and stakeholders. We know we need to improve resilience in the short-term and in the long-term.

“The Scottish Government has invested more than £2bn in our ferry services since 2007 and we continue to work towards introducing more capacity and greater resilience on the Clyde and Hebrides network. Since May 2021, we have bought and deployed an additional vessel in MV Loch Frisa in June, chartered the MV Arrow, made significant progress in the construction of vessels 801 and 802, commissioned two new vessels for Islay, progressed investment in essential harbour infrastructure, and now we are delivering a further two new vessels. At the same time we are continuing to work on pursuing all reasonable and appropriate opportunities to enhance capacity and resilience in the short term through second hand vessels.

“I share the desires of island communities for sustainable and effective ferry services and look forward to continuing our constructive engagement with them on future services and vessel replacements. As part of the forthcoming islands connectivity plan, we will set out a long-term investment programme for vessels and ports which the Project Neptune report called for and islanders need to see.”