Tariff Rebate Subsidy (Northern Isles)

Part of Prayers – in the House of Commons at 10:32 am on 12th March 1997.

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Photo of Mrs Helen Liddell Mrs Helen Liddell , Monklands East 10:32 am, 12th March 1997

I shall be brief, as several of my hon. Friends have posed serious questions to the Minister and we want to give him the utmost opportunity to respond.

I, like my hon. Friends, congratulate my hon. Friend the Member for Kilmarnock and Loudoun (Mr. McKelvey) not just on his contribution to the debate and on securing it, but on the excellent way in which he has chaired the Scottish Affairs Committee. Before becoming a Member of Parliament, I watched the Committee's work closely, and I am well aware of the depth of knowledge and expertise that is applied to many significant issues that affect Scotland.

Through detailed examination of the issues raised in the debate, my hon. Friend the Member for Kilmarnock and Loudoun has done us a great service by bringing down to more simple terms an extremely complex but interesting subject that is of considerable import to the people of the Northern Isles.

The important point that my hon. Friend made relates to the reasoning behind the Government's decisions involving ferry services to the Northern Isles. I reiterate his concern about the value judgments that are being applied by the Government in their responses to the Select Committee report. He drew attention to a considerable misgiving that has been articulated to me by people from the Northern Isles, and a point that has been raised by a number of hon. Members today: the close relationship that seems to exist between the Scottish Office and P and 0 Scottish Ferries.

The fact that people from the Northern Isles raise the matter is an important aspect to be taken into account. The people of the Northern Isles require reassurances that their best interests are at the front of Government policy, not some other arrangement that the Government have yet to explain to us.

The decision, taken by the former Secretary of State for Scotland, the right hon. Member for Galloway and Upper Nithsdale (Mr. Lang), to change the basis of tariff subsidy to the Northern Isles is still questioned. The hon. Member for Orkney and Shetland (Mr. Wallace) drew attention to the consultants' report, over which there is a great question mark. Many of us want more detailed information about the way in which the right hon. Gentleman came to his conclusions on the future of tariff subsidy to the Northern Isles.

I share some common feeling with my hon. Friend the Member for Kilmarnock and Loudoun about whether the decisions in relation to P and O and the services that it provides to the Northern Isles have some dogmatic origin, rather than being directed to the best interests of the public in the Northern Isles.

My hon. Friend made a detailed point about the decline in the financial performance of P and O over 1991–92. The same point was made by the hon. Member for Angus, East (Mr. Welsh) when he drew attention to the depreciation of second-hand ferries and where they appear in the accounts of P and O.

Is it not ironic that I, on the Opposition Benches, am challenging the Government about their creation of an artificial monopoly for P and O, and advocating the free market and competition? Adam Smith must be turning in his grave at the Government's decisions that have led to this cosy relationship with P and O—and to £7.6 million being given to the company. It has been allowed to operate with an artificial monopoly.

In his closing remarks, my hon. Friend the Member for Kilmarnock and Loudoun made a plea for a sensible examination of the situation in the run-up to the general election. That is a reasoned request, and I do not wish to make any partisan point. A general election is looming. There are significant issues to be addressed. The Minister is a sensible man and takes his responsibilities seriously. I urge him to delay decisions on the tendering process to allow the Government elected in the next few weeks—whatever the colour of that Government—to re-examine the issues.

The points made in the Select Committee report about the involvement of Caledonian MacBrayne are very serious. I find it bizarre, to say the least, that a publicly owned company has been excluded from the tendering process for Northern Isles ferries. I find it questionable that we discovered the European regional development fund elements only after 15 of the companies that had entered the tendering process had withdrawn.

The cynicism of the people of the Northern Isles and the rest of Scotland must be addressed. The best way to do that would be to take the issue out of the fevered run-up to the general election and allow a more reasoned re-evaluation. That would provide an opportunity to re-evaluate the Kirkwall-Invergordon ferry as well. We must seek a resolution to the difficulties that have arisen in the case of the Northern Isles that takes into account the most economically efficient, as well as the most socially reasonable, option.

If the general election results in a change of Government, a Labour Government will seek to reopen the tendering process to allow CalMac to tender, and will seek to re-evaluate the issue of ferry services to the Northern Isles. We will try to find a solution that suits the Exchequer, and takes into account the concerns of people in the Northern Isles.

Let me make a more general point. I am worried about the apparent vendetta against CalMac. My hon. Friend the Member for Western Isles (Mr. Macdonald), who is probably more able than anyone else to analyse CalMac's performance because it provides a vital lifeline to the Western Isles, has referred to the importance attached by people there to CalMac's being given an opportunity to secure the contract for the Northern Isles. We have heard from my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) about CalMac's expertise in operating custom-built ferries, and we know of its commitment to securing continuity of service to remote Scottish communities. It is bizarre that it should have been excluded from the tendering process.

I regret having to say this, but, when we look at what happened in relation to the Northern Ireland contract, we must ask what on earth was going on when CalMac was excluded. What makes the situation even worse is the fact that, having been excluded, CalMac was forced to sell one of its vessels at a knockdown price to Sea Containers, which won the contract. That alone is cause for re-evaluation of the issues.

In view of what KPMG has said about the Northern Isles service, there may well be a case for a monopoly to continue. I leave the judgment open, but, if there is such a case, is there not a pressing public responsibility to ensure that a public sector operator operates with the taxpayer's best interests in mind, rather than the profitability of an individual company? Reading the Government's responses to the issues that have been raised, I was surprised to note that P and O's financial performance figured so strongly. I wish that, just occasionally, the Government would take into account the requirement to ensure that CalMac, a well respected ferry operator, is given a level playing field in which to compete.

The issues involved are extremely serious. We are talking not just about the future viability of services to the Northern Isles, but about the economic viability of the Northern Isles. I listened carefully to the reasoned arguments of my hon. Friend the Member for Kilmarnock and Loudoun and, in particular, the hon. Member for Orkney and Shetland who, in his final remarks, made a number of important points about the role of the islands councils, their inclusion in the assessment of the qualitative aspects of tenders and the role that they should play in monitoring the operation of the service. The councillors are the elected representatives of the people of Orkney and Shetland, and their concerns should be taken into account.

The hon. Member for Ayr (Mr. Gallie) asked some pertinent and serious questions, which I hope the Government will answer. For instance, he questioned the suitability of the secondhand vessels that P and O has used, and spoke of the impact that that has had on P and O's accounts in terms of the depreciation of those vessels. He asked for guarantees that standby vessels would be available: such provision is important in remote communities. He also asked what the Government would do to deal with under-utilisation.

One of the hon. Gentleman's most important questions about the tendering process was, "Why was the issue of the European regional development fund raised so late in the day?" He also raised an issue that has caused me considerable anxiety since it was brought to my attention yesterday—access to ro-ro facilities for P and O at Aberdeen harbour. I am also a bit concerned about the fact that the Government have sought to appoint P and O's chief executive to Aberdeen harbour board. We must be assured of transparency in all decisions relating to the Northern Isles.

I think that my comments have been very restrained. I have not, for example, drawn attention to the fact that, since 1991, the Conservative party has benefited to the tune of £100,000 a year from P and O, because I feel that that would have made the debate partisan. It is, however, crucial in the run-up to the general election for us to stand back from the issues, and to give the new Government—whatever their persuasion—an opportunity to take account of the concerns of the people of the Northern Isles about monopolies, the concerns raised by hon. Members about the tendering process and the concerns about ensuring continued economic viability for the remote communities of the Northern Isles.