The hon. Gentleman wants to intervene, but it would be better to let me run.
A start point for contract conditions on block grant might be a maximum freight charge of £5.15 plus an allowance within the contract for an X-factor increase year by year of the inflation rate. That would alleviate fears of predatory pricing, which would drive competition out of the marketplace and leave P and OSF with the world as its oyster. The provision of such a service would be a major factor in the consideration of the contract. Increased TRS on livestock and provision for peak livestock capacity within the passenger contract would be welcomed all round.
I warmly welcome my right hon. Friend's decision to reinstate TRS on the carriage of bulk freight. From the minutes of proceedings in the report, it will be noted that my hon. Friend the Member for Eastwood (Mr. Stewart) and I urged that TRS should be amended or revamped, so that livestock and agricultural freight and industrial bulk and semi-bulk freight are covered. Given that the Government have addressed that matter, I am not in a position to complain about the Government's response to the report.
I want to quote a letter from Highlands and Islands Enterprise, which
has been monitoring the prices of a range of goods in Orkney and Shetland following the changes in the Tariff Rebate Subsidy".
It has determined that
there have been relatively few changes in prices of goods in Orkney and Shetland which can be linked to the Tariff Rebate Subsidy.
That is, to the removal of the TRS. That seems to justify to some extent the concentration of my hon. Friend the Member for Eastwood and myself on the bulk freight aspects of TRS. The letter also suggests that
there are considerable concerns among the Orkney and Shetland business community
about the renegotiation of the P and OSF contract and whether that might have an adverse effect. I am sure that my right hon. Friend the Secretary of State will take note of such concerns.
On the consequences of the reinstatement of the bulk freight TRS, Highlands and Islands Enterprise says:
This has reduced the price of sand imports from Aberdeen… and quarries on Shetland are in a position to resume exports of aggregates.
Members of the Committee felt strongly about that issue, and we all welcome those findings. We also welcome the fact that the Government have undertaken a bulk freight review, and I have no doubt that its findings will be welcomed.
Without resorting to a line-by-line analysis of the Select Committee's report and the Government's response, I emphasise that my concern is to ensure that maximum advantage is taken for the islanders and the taxpayer of any continuing Government subsidy. I noted the remarks of my hon. Friend the Member for St. Ives (Mr. Harris) in respect of the Scilly Isles ferry service, which is not subsidised, and I listened to the response of the hon. Member for Kilmarnock and Loudoun, which referred to falling populations in the Northern Isles. Having been an observer on the Committee's visits to Orkney and Shetland, I believe that there is a reversal of that process there, with many of the immigrants to the Northern Isles coming from south of the border, although I doubt that few are from the Scilly Isles.
I do not believe that the matter of livestock and bulk freight can be catered for in any way other than through the TRS system, as currently established. I referred earlier to the time scales in the Government response. However, I have several questions to ask and points to make in respect of the contract for passenger services. I queried from the start the suitability of the present P and O vessels and the philosophy of adapting old vessels for that route. Members of the Committee emphasised that that was a factor. I should like a guarantee that any future contract will ensure availability of stand-by vessels on the route. The under-utilisation factors of the service identified by the Committee should be addressed.
I want to know why the availability of European regional development fund money has not become known to those who tendered, until this late stage of the tender process. I understand that 18 companies originally tendered. It is only fair, correct, and in the interests of the taxpayer and all concerned, that any of the companies that feel that they could resubmit a bid, given the availability of ERDF funding, be allowed to do so. I ask my right hon. and learned Friend the Minister to take account of the fact that that would be in everyone's interests.
I understand that P and O has the lease on the roll on/roll off facilities in Aberdeen harbour. Whoever is the successful bidder for the contract must have open access to that facility; it cannot be blocked by P and O. I well understand that there will be difficulties. There will be a need for regular, timed services, which could be disruptive to P and O if that facility were used, but that facility is much needed for the service that is provided, and the successful bidder must have access to it.
I find it difficult to understand how the question of cross-subsidy on general freight can be addressed in full. I suggest that, whatever the method used to determine passenger subsidies, a link be made to the level of freight charges currently made and the level of freight volumes currently carried, and a substantial amount of subsidy made if no freight cross-subsidy is to be considered.
The list goes on, but as the hon. Member for Greenock and Port Glasgow (Dr. Godman) keeps pointing to me and to the clock, I recognise that other hon. Members wish to speak in the debate. I look forward to hearing what they have to say and, above all, to hearing the response of my right hon. and learned Friend the Minister.