I will update members on the Clyde and Hebrides ferry services contract procurement. The Scottish Government would rather that we did not have to tender the services; my party opposed the initial tender of the services in 2004. However, it has been demonstrated that European Union law requires the Scottish Government to tender them.
The requirement stems from a Council regulation that applies the principle of freedom to provide services to maritime transport in member states and from the relevant provisions of the Treaty on the Functioning of the European Union. Article 4 of the maritime cabotage regulation states:
“Whenever a Member State concludes public service contracts or imposes public service obligations, it shall do so on a non-discriminatory basis in respect of all Community shipowners.”
Furthermore, the Commission guidelines on the regulation state:
“The Commission … therefore considers that launching an open tender procedure is in principle the easiest way to ensure non-discrimination.”
Successive Scottish Administrations have attempted to achieve an exemption from tendering CHFS since 2000, when the Commission first wrote to ministers questioning the compatibility with EU law of the subsidies that were being paid to CalMac Ferries. In January 2001, the Scottish Executive announced a package of provisional proposals, which it submitted to the European Commission for consideration. The Commission responded in November 2001. It agreed to the tendering of the CHFS network as a single bundle but confirmed the requirement to tender.
In June 2004, Nicol Stephen, the then minister for transport, announced that, following discussion with the European Commission on the implications of the Altmark case, tendering of the entire CHFS network would proceed. Ministers held further discussions and exchanged correspondence with the European Commission between December 2004 and July 2005. The Scottish Executive concluded that tendering the CHFS network was a legal requirement and published its consideration of the requirement to tender in September 2005.
The CHFS contract was awarded to CalMac in August 2007, and the Commission began an in-depth state-aid investigation of Scottish ferry subsidies. The formal process began in April 2008 and concluded in October 2009. The Commission looked in detail at how contracts had been awarded and subsidies paid. Its decision that state-aid payments for CHFS were allowable and proportionate recognised that the contract had been awarded in compliance with the maritime cabotage regulation.
The Commission’s position on tendering can be seen clearly from decision C 16/2008 of 28 October 2009. In 2012, Keith Brown, the then minister for transport, wrote to Commissioner Almunia, the then competition commissioner. Keith Brown stated:
“I would therefore encourage a review of the requirement to tender ferry services to ensure that the rules are proportionate and appropriate to the sector and support the provision of these essential services.”
Commissioner Almunia replied:
“Consequently the Commission strongly advocates the widest possible use of open and transparent tendering procedures when public authorities entrust companies with a public service obligation.”
We are obliged to tender CalMac’s services. That was recognised by the previous Lab-Lib Administration. We recognise the outcome of the Commission’s investigations. We also recognise our legal obligations and are bound by the precedent that they set.
The Labour-Lib Dem coalition initiated the first tendering of the CHFS contract. Some Opposition members who supported the tender then appear to be suggesting that we should now break EU law, the consequences of which would surely result in challenge.
Let me be clear about why we will not breach the law. Were we not to tender the services, we would put at risk the services, our subsidy to them, the routes, the vessels and the investment. A free-for-all on Clyde and Hebrides services would see competition on some islands and a reduction in services to others, which is not what the Government wants. I do not believe that that is what the Opposition or island communities want either.
The National Union of Rail, Maritime and Transport Workers will undertake industrial action on CalMac ferry services today, tomorrow and on Friday. Action is being taken to support island communities and the travelling public at this time. As the Minister for Transport and Islands, I appreciate the full nature of those lifeline services.
The trade unions expressed concern about CalMac’s proposals for changes to the existing pension scheme and how pensions would be treated in the next CHFS contract. They also oppose the tendering process being contested by CalMac and Serco. Ministers have actively engaged with the unions to develop a tender that provides employment and pension protections to the current workforce. The Cabinet Secretary for Infrastructure, Investment and Cities and I have met the unions on a number of occasions and provided assurances that a fair, affordable and sustainable pension scheme will be written into the new CHFS contract.
We remain committed to further engagement and dialogue with the unions to ensure that appropriate employment and pension protections are included in the invitation to tender and subsequent contract to operate the CHF services. The cabinet secretary will meet the RMT in London to discuss the way forward. A number of meetings have been scheduled between the current operator—CalMac Ferries Ltd—and other trade unions to discuss the pension issue. We will also continue to encourage CalMac Ferries and the RMT to engage in meaningful and constructive dialogue in an attempt to resolve the current dispute.
The current tender process does not involve the Scottish Government selling any assets or controlling interests to the private sector. It is a tender for the provision of a state-aid subsidy to an economic operator for operating lifeline ferry services for a set duration of eight years. Of course, it is not possible or indeed appropriate for the Scottish ministers to predict or prejudice the outcome of the tender process. I emphasise that, no matter the outcome of that process, the Scottish ministers will retain ownership and control of all the vessels and ports that are currently under public ownership. We will set routes, timetables and fares as now and retain full control of the services that the operator provides through the public service contract.
Contrary to reports in the press, there shall be no cherry picking of routes, and successful bidders will not be able to cut routes. The specification that ministers set is designed to protect and enhance our lifeline ferry routes, not to diminish them.
This Administration has made significant investments to support lifeline ferry services, the commissioning of new vessels and harbour infrastructure since it came to power. A record £1 billion has been invested in port infrastructure, vessels and ferry services from 2007 to date. Support for the road equivalent tariff, which the Government delivered, will substantially reduce the cost of ferry travel for passengers, cars, coaches and small commercial vehicles on the CHFS network.
The accusation that the Government wishes to privatise ferry services is simply not true. I want the highest levels of confidence that the procurement process is fair and transparent. Therefore, I announce a further initiative in the procurement of ferry services in Scotland: the setting up of an independent procurement reference panel to ensure fairness, openness and transparency in the procurement process.
The remit for that procurement reference panel will include assurance that nothing is being done in the CHF services procurement that could be perceived as discriminating against either of the tenderers. The panel shall be invited to review and comment to Transport Scotland on the initial invitation to tender, which is due to be issued on 10 July 2015; the interim invitation to tender, which is due to be issued in autumn 2015; and the final invitation to tender, which is due to be issued in December 2015. Transport Scotland will take that independent procurement reference panel’s views into account and provide an undertaking to consider all relevant points that it makes. Any necessary changes arising from the panel’s assessment will be incorporated into the subsequent or final version of the invitation to tender.
Six groups have been set up to offer their insights into the procurement of CHFS. Those groups cover trade unions; local authorities; ferry user groups; tourism, economy and business; ports and harbours; and health, social care and accessibility. Because of procurement rules, the procurement reference panel cannot be involved in evaluating the bids or overseeing the appointment of the successful tenderer. However, it is proposed that a suitable representative from each of those six groups be invited to provide assurance to Transport Scotland and the broad ferry users community that the procurement process is being implemented in a fair, transparent and balanced way that represents local communities, various sectors and interest groups. The obligation to appoint the successful tenderer rests with the Scottish ministers, and it cannot be transferred in whole or in part to the procurement reference panel.
In the interests of openness and transparency, each version of the invitation to tender will be published on the Transport Scotland website and will thereby be available to the public. I also propose that the final views of the procurement reference panel, at each stage of the process, should be published.
I consider that the initiative is a positive step forward in ferry service procurement, and I commend it to the chamber.