What happened on Gourock-Dunoon
The announcement is here entitled "Bright
New Future for Gourock-Dunoon service". Why did they not
just call it "Brave New World for Gourock-Dunoon service",
the extension of hours could have been done years ago they did not
have to wait for this. It is as I predicted months ago, passenger-only.
(1) Summary
The tender for Gourock-Dunoon was based on systemic false and misleading
information from the government and amongst other things will create
a vehicle-carrying monopoly by Western Ferries across a strategically
important part of the transport network. The government's handling
of this will have major adverse consequence for the dependent communities,
the users and the taxpayer. There are a number of things which should
be pursued as a matter of urgency but there are two in particular
which stand out.
First Western's route is classifiable as a public service route
under EU law and so eligible for the imposition of non-negotiated
public service obligations (PSOs) including price controls by the
government. There are precedents for the imposition of PSOs without
subsidy on other commercial EU ferry services. This option should
be pursued as a matter of urgency to protect the public interest
here.
Second, there is already a generally recognized need for an independent
Inquiry into this debacle but that is unlikely to be set up by the
Scottish Government or Scottish Parliament. But while this whole
tender was framed around the need to satisfy EU law it is not the
Scottish Government that Brussels holds ultimately responsible here,
it is the UK government. The fact that the UK has devolved some
responsibilities here is really seen as an internal matter for the
UK, Brussels still regards Whitehall as responsible authority Since
the UK authorities have the ultimate responsibility here, they also
have a legitimate interest - indeed one would argue both a right
and obligation - in ensuring good governance with regards to what
is done in their name to Brussels. It is to the UK authorities to
whom arguments should now be made that there is a compelling need
that they should set up an independent Inquiry into the issues here.
I have put at the bottom of the front page of www.brocher.com a
collection of links to relevant documents which help inform the
story here. Most of the "what" and "why" of
what has happened is discussed in these documents. This one is just
to try to draw these threads together and make sense of today's
announcement. .
(2) Political affiliations/non-affiliations
For the record, I certainly cannot be accused of being naturally
antagonistic to the SNP as a party or as a government, indeed I
have openly supported the party and its aims since I was a student
in the Seventies, right up to and through the 2007 Holyrood election.
I was a member of Alex Salmond's first Shadow Cabinet in the Nineties,
and before the SNP formed a government in 2007 I had been an invited
member of SNP working parties, including those chaired by John Swinney
(the Cabinet Minster ultimately responsible for ferries 2007-2011)
and Mike Russell (now Cabinet Minister for Education and since May
the constituency MSP for Argyll and Bute). However, I am not a member
of any political party, nor have I been for many years.
(3) Some simple economics
It is essential to understand the basic economics of ferries on
routes like Gourock-Dunoon to also appreciate the significance of
what has happened here. If you want to transport foot passengers
using ferries between centres of population to connect with other
forms of public transport (e.g. buses and trains) you may choose
between a passenger-only vessel or a vehicle-passenger vessel.
Foot passengers typically deliver little revenue and have high
costs, mostly high crewing levels for safety reasons. So a passenger-only
vessel usually needs high fares or high subsidies, a fast passenger-only
ferry is a gas guzzler and would be likely to have even higher fares
or be an even greater subsidy guzzler.
By contrast, transporting foot passengers on modern vehicle-passenger
roro ferries on routes like Gourock-Dunoon would add much less to
costs than it does to revenues. As Western Ferries has demonstrated,
the money in such routes is in the vehicle trade, adding vehicle-carrying
roro services can help defray some or all of the losses and subsidy
that would have been incurred if the service was just foot passenger
only.
But such ferries have to be built specially, there is not a stock
of them hanging around on the second-hand market. Building two such
ferries for the Gourock-Dunoon town centre to town centre CalMac
route was exactly what the 2007-2011 SNP Government had promised
to do in their 2007 manifesto commitment.
That never happened despite SNP MEP Alyn Smith getting confirmation
from the Commission in 2007 that there was no problem with vehicle
carrying on the town centre route as long as passenger subsidy was
ring fenced from vehicle-carrying. There are well established procedures
for doing this. There was no law preventing them building these
vessels. The Government could have commissioned and tendered the
two vessels needed for the route on the same basis that the vessels
for the rest of the CalMac network route were built and tendered,
and done so within the space of their four year tenure 2007-2011
So what happened? We may never know the full story, but with the
help of Freedom of Information (FoI), more and more is coming out.
At the same time there will be things which will probably be beyond
the reach of FoI. But the critical period that almost certainly
determined all this was the year 2007.
(4) 2007 and the background to it
We know that what was to become the SNP government was publicly
committed at the May 2007 election to building the two vehicle-passenger
ferries the town centre route. There were other things happening
at the same time of potential relevance to Gourock-Dunoon. In 2007
Brian Souter made a major (£500,000) donation to the SNP.
The same year he started a fast passenger-only trial ferry service
on the Forth called "ForthFast", the trial was to link
with a number of Stagecoach bus routes. Brian Souter's technical
adviser for "ForthFast" was Alistair Macleod who was the
Chief Executive of "ClydeFast" which was a venture which
Mr Macleod had been promoting for some time, without any obvious
success, for a fast passenger-only service on the Clyde, on a route
that woudl have included Dunoon and Gourock. By early 2010 Brian
Souter's Highland and Universal Securities Ltd was one of the four
shortlisted companies for the Gourock-Dunoon tender and then in
2011 it was Alistair MacLeod in his capacity as consultant to Highland
and Universal Securities who announced that "The very short
timescale and the fact that it would be almost impossible to procure
a suitable vessel in time meant that the company decided to withdraw"
(at least Brian Souter cannot be said to have been less than open
about his intentions for the route; if you are not planning to run
a fast passenger ferry on the route, then why have as your adviser
and representative for the route someone who is a technical specialist
in fast passenger ferries?).
There were other voices that would have been active around 2007
and later, such as Lord George Robertson the ex-Labour Cabinet Minister
and ex-Secretary General of Nato brought in as a non-executive board
member of Western Ferries. Lord George's knowledge of ferries is
not well documented, but he brought with him significant networking
and lobbying assets. Roy Pedersen was both a SNP councillor and
private transport consultant who had long argued the superficially
attractive but economically flawed case for fast passenger ferries
and short vehicle crossings. Since fast passenger ferries fitted
the ClydeFast/ForthFast business model and short vehicle crossings
fitted the Western Ferries business model, it would have helped
make the case for what I later described elsewhere as the symbiosis
of the shared, complementary and mutually supporting business models
of Brian Souter and Western Ferries.
Finally, the Transport Minister (Stewart Stevenson)'s own civil
servants were pushing for a passenger-only solution for the town
centre route. If a vehicle carrying service actually started between
the two town centres, helped reduce subsidy, or even - heaven forbid
- actually eliminate it, then it would mean the advice they and
their predecessors had given to ministers over the years to maintain
the frequency restriction on the CalMac service and not invest in
the new vessels the route had needed had cost the taxpayer tens
of millions of pounds of unnecessary subsidy.
It is difficult to credit that senior figures in the SNP Government
would not have been aware in 2007 given the Brian Souter / fast
ferry / ForthFast / ClydeFast / Alistair Macleod connections that
their major donor could actually have a possible or potential interest
in Gourock-Dunoon. If they were not aware, there would have been
plenty voices to have made sure they were aware. A lot can be done
with the help of proxies.
Which helps explain why just a short time after having promised
to build two new vehicle-carrying ferries for Gourock-Dunoon, we
learned just a few weeks ago from the Herald that the Government
turned round and effectively offered Western Ferries in 2007 a vehicle-carrying
monopoly on the Gourock-Dunoon market if they would just run some
of their service from their out-of-town terminal at McInroys Point
into Dunoon. That in itself was a scandal which has only recently
been made public, but what many people have overlooked is that this
would still leave a void in terms of the foot passenger service
from Gourock to Dunoon town centres. Western's business model and
their active practice does not encourage foot passengers, so it
would need someone to fill that void and of course there was an
obvious candidate in Brian Souter's company - a company whose business
model was based on high cost but subsidised passenger-only services
as a bridgehead to link with and develop bus services at both ends
of its ferry routes.
There is nothing wrong with companies pursuing and lobbying for
their commercial interests as long as government are aware that
private and public interest are not always the same thing. And at
the same time if you are an East Coast minister - as all the ministers
in this political pecking order were, all the way from Stewart Stevenson
through John Swinney up to Alex Salmond - this must have seemed
like a win/win/win situation all round. None of them knew much more
than how to tell the pointy end from the rear end of a CalMac ferry.
The idea of a fast ferry would have also have seemed like a modern
high tech fix. Giving Western the vehicle-carrying monopoly the
company craved would have got them of the government's back (or
so they thought). And of course with Brian Souter taking over the
town centre route it would have made happy someone that Alex Salmond
had praised in 2007 as "one of the outstanding entrepreneurs
of his generation". As I said win/win/win all round, how that
belief would have arisen was even understandable, it was what happened
subsequently that represented systemic and cumulative breaches of
the public interest and public trust.
What was win/win/win for Salmond, Souter and Western Ferries was
lose/lose/lose for the dependent communities, the users, and the
tax payer for the reasons that I set out above in terms of the economics
of this route. It would mean a vehicle carrying monopoly, a degraded
town centre to town centre service and a massive and totally unnecessary
subsidy for the tax payer. Not only that, Western's publicly declared
plans opened the way for this same trick to be repeated all the
way down the Clyde, starting with Arran then moving onto Bute. It
would mean millions for the private companies involved but many
millions more in avoidable costs to the public.
So why did they not go public with this win/win/win strategy? At
some point someone with local knowledge inside this big tent would
have pointed out that the idea of a fast passenger ferry had been
floated at a packed public meeting in Dunoon before the 2007 election
by the Lib Dem MP and had been howled down. If it were to be done,
it had best be done slowly and covertly, and certainly not made
public.
(5) What happened next
Al the above sets out the context and explains 2007 to 2011. First,
as Western recently revealed, the government effectively and privately
offered it a vehicle-carrying monopoly in 2007, the company said
this offer was seen by them as a standing offer and as far as they
were concerned was never withdrawn. Over the next four years the
Government were to claim that they were still actively working to
ensure a town centre to town centre vehicular service; that they
were in active and protracted discussions with the European Commission,
that it was the European Commission that was stalling progress;
that there was a European law against building new boats for the
route; and that there were suitable vehicle-carrying vessels for
the route available on the second-hand market.
None of that was true, all of these claims were shown to be false
- and the Government must have known they were false. The last bit
about "suitable" vehicle-carrying ferries being available
on the second -hand market for Gourock-Dunoon was particularly cynical
on two counts, first it was designed to keep false hope of vehicle-carrying
on the route alive right through the 2011 election, and second if
it had not been exposed as a sham the Government would have subsequently
used the supposed "market test" of the tender to falsely
argue that passenger-only must be more efficient since bidders choose
not to bid with vehicle-ferries when they are supposedly available.
The effect of all this - and it has to be assumed the intention
- was to conceal: first that the Government had no intention of
maintaining (let alone improving) the vehicle-carrying service (the
2007 offer to Western confirmed that, and most importantly confirmed
that to Western); second that they had hoped that Brian Souter would
take over and run a fast passenger-only service from Gourock-Dunoon;
third that Western would get what they wanted and get them off the
Government's back; fourth that all this had been the case since
at least 2007; and finally that they hoped all this could be concealed
by dragging things out until after the May 2011 election
They knew that there would be a fuss after the 2011 election but
the calculation would have been that if a week is a long time in
politics, what was then four years (and is now five years) is an
eternity and that by the time the 2016 Holyrood election came round
that many voters would have moved away or just died off, memories
would be dimming, and anyway it could be dismissed as just a little
local issue. They would also puff up the "improved" fast
ferry service. That all helps explains what happened, why it happened,
and when it happened. It is the only explanation that helps makes
sense of what would otherwise just appear to be a series of bizarre
and incoherent statements and actions by the Government. Unfortunately
for the Government the European Commission refused to play ball
and accept any more foot dragging by the Government, it stuck on
its deadline of June 2011 for the tender, around which point Brian
Souter lost patience and pulled out, whether it was because it had
taken so long or not long enough, we may never know.
So who is individually responsible? That depends how far up the
ministerial pecking order you go. Harry Truman had a sign on his
desk saying "the buck stops here", I doubt if Alex Salmond
has a similar sign on his desk but the sentiment and the reality
should be the same. We do not know if he took any direct interest
or part in the Gourock-Dunoon issue or simply left it to his friend,
ex-chauffeur and Transport Minster to take what he would regard
as the best decisions. We do not know if the Transport Minister
was an unwitting dupe who blundered into this through pressure from
inside and outside government. We know what was done, and essentially
why it was done, what still needs to be established is who decided
what and when
But at the very least there is a collective responsibility here,
that responsibility is very clear and there must be corresponding
accountability. If a government makes statements which help serve
their political advantage, statements which are not true, statements
which are demonstrably and verifiably not true, and statements which
they had every reason to know were not true, then it is not just
the dependent communities, users and taxpayers who have a problem,
by every democratic standard that government should also have a
problem.
So far this Government has relied on the fact that most journalists,
politicians and lawyers tend to be urbanites and at least in Scotland
have difficulties in connecting with issues that do not impact directly
and obviously on Edinburgh, Glasgow, or both. Left to their own
devices, this Government will see no need to change the strategy
of delay, deceit, and blaming everyone else that they practiced
for the last four years. Indeed, given the hole that they have created,
it could be argued that they cannot now afford to change that strategy
even if some of the Government wanted to.
If you want to see what tunes the Government will play just ead
the chaff from the SNP candidate (now MSP) for Argyll and Bute in
the Dunoon Observer on the week of this month's election now praising
the virtues of fast ferries and talking up his future dream of a
fast ferry service from Rothesay to Dunoon to Gourock and then into
Glasgow centre - in short nothing more and nothing less than the
old ClydeFast fantasy (wearily I had to point out in the paper the
following week - but after the election - the simple economics that
buses and trains can get you from Gourock to Glasow centre much
faster, cheaper, more often and with more stopping options on the
way than any fast ferry ever could). Where did the constituency
MSP and cabinet secretary get this misguided and economically flawed
advice? Who is advising him? All this may just help keep going the
nonsense and incoherent vision of fast ferries that are not wanted,
needed, or justified as part of a softening up process that will
lead to future attempts to force these solutions on the public -
whether further down the Clyde or eventually back up at Gourock-Dunoon.
(6) What to do now?
We know the tender for Gourock-Dunoon was based on systemic false
and misleading information from the government. Based on past experience
the government will respond to such arguments with bluff that any
actions or complaints along those lines could threaten what little
remains of the town centre service itself. I personally no longer
believe anything this government says and I would advise everyone
else to treat such threats the same way.
So what can be done? Well, starting with the easy ones, there is
scope for more Freedom of Information questions (these have been
very useful so far) Also there have been a lot of interested parties
involved in this, some might wish to get their own version out in
public to defend themselves and pre-empt other versions, the more
interested parties there are, the more chances of the truth coming
out (as we have seen already).There are politicians and journalists
who have an interest in this and might pursue it inside and out
of parliament. And there should be immediate pressure to impose
price controls in the form of PSOs on Western Ferries given its
impending monopoly situation, given that its route is classifiable
as a public service route under EU law, and given the recent court
decision that it should find £3mill from somewhere to pay
what HMRC say they are owed. There are precedents for the imposition
of PSOs without subsidy on other EU ferry services
But the main issue is that this tender cannot be allowed to stand
unchallenged for six years. There is at the very least an absolute
and urgent need for an independent Inquiry. At the Dunoon hustings
in April I asked all five candidates if they would support a case
for a judicial review of this tender All gave various degrees of
support except the SNP candidate, Mike Russell who said he would
support an Inquiry, but only by the Scottish Parliament and only
if it looked at the history of the route going back several decades.
Such an Inquiry would be a complete waste of time, first it would
have limited powers including limited access to information, second
its terms of reference would be set by Parliament which is now framed
by an SNP majority, and third if it covered decades instead of focusing
on the last four years here it would just lead to a political slanging
match as to who was to blame for this fiasco. If the SNP Government
and Parliament are allowed to set the terms of any investigation,
we can expect it to frame, delay and distort everything to its advantage.
There must be an independent inquiry and if there is any level
of democratic control and accountability left in Scotland then what
is left of a viable political opposition must be pressing for and
indeed demanding this now.
On that last point, there is one further twist than many parties,
including politicians, seem to have overlooked. It is true that
the Scottish Government has devolved powers within the UK for dealing
with such issues as ferry services, it is true that the Commission
investigated these services during the 2007-2011 Scottish Government,
and it is true that the Scottish Government was seen as the party
responsible for making sure that the Gourock-Dunoon town centre
(CalMac) service and the resulting tender were compliant with EU
law. Indeed, not only the tender but also the recent tonnage tax
judgment that went against Western Ferries were the subject of much
debate and analysis to make sure they were seen as compliant with
EU law. So both the Scottish administration and Brussels have central
parts to play here.
But there is a third element in this governance mix, and that is
the role of the UK government. It was not Scottish law that mattered
in the case of Western's tonnage tax case, it was EU state aid and
UK tax law. It is not the Scottish Government, or before that the
Scottish Executive, that Brussels writes to when there are issues
dealing with State aid and Scottish transport. The fact that the
UK has devolved some responsibilities here is really seen as an
internal matter for the UK, Brussels still regards Whitehall as
ultimately responsible. When Brussels agreed to fares discount for
air travel for certain Scottish island residents in 2005, it was
not Tavish Scott or Jack McConnell who signed the agreement with
Brussels, it was the then UK Foreign Secretary Margaret Beckett.
When Brussels wrote about their concerns regarding possible State
aid and Gourock-Dunoon during the last Scottish Parliament, they
did not write to Stewart Stevenson or even Alex Salmond, they wrote
to the then UK Foreign Secretary David Miliband.
Since the UK authorities have the ultimate responsibility here,
they also have a legitimate interest - indeed one would argue both
a right and obligation - to ensure good governance with regards
to what in done in their name to Brussels. While there would be
no majority in the Scottish Parliament for an independent Inquiry
with strong legal powers into this debacle, the government does
not have the same control and influence at UK level, not even (or
not particularly) among Scottish MPs.
An independent Inquiry by the UK authorities with legal powers
of access to information could be justified on the grounds I have
just stated and could find real interest and support amongst MPs
of all parties with the exception of the SNP. While constituency
MPs might be expected to take the lead here, the issues are much
wider than just Cowal and Inverclyde. Clearly such an Inquiry should
at least cover the town centre route and the events leading up to
the present tender, but it could be quite legitimate to add in Western
Ferries and its route as well since the recent tribunal involved
possible State aid issues, and as well as UK tax law there are possible
competition issues, all of which UK authorities have an interest
in and are responsible for. An independent Inquiry set up by the
UK authorities into Gourock-Dunoon could be expected to provoke
a storm of protest from the Scottish Government including from the
First Minister. However I do not think that would put off Scottish
MPs, on the contrary it could be argued that this is one of the
things they are there for. At a broader political level, an Inquiry
that related to the First Minister's use of his present powers could
be seen as a potentially useful counterpoint to his recent demands
for new powers. It is certainly an important possibility out of
several lines that could be well worth pursuing. This is not just
a little local difficulty, this is a failure of governance at national
(Scottish and UK) level and has to be seen and dealt with as such.
Neil Kay, May 25th 2011
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