Tariff Rebate Subsidy (Northern Isles)

Part of Prayers – in the House of Commons at 10:45 am on 12th March 1997.

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Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West 10:45 am, 12th March 1997

This has been a very good debate, in which a number of important issues have been raised. I pay tribute to the Chairman and members of the Select Committee for their perseverance and application in inquiring into these complex matters.

We share the Committee's view that efficient and affordable sea transport services are vital to the movement of essential imports and economically important exports for the islands communities. As evidence of our commitment to support essential shipping services to the islands, we shall this year provide subsidies of £7.6 million for P and O Scottish Ferries for passenger services, £700,000 for P and O and Orcargo for livestock exports and £300,000 for bulk shipping operators. That is in addition to grant assistance for pier and harbour works at Scrabster, Stromness and elsewhere in Orkney and Shetland. The Government have paid Orkney and Shetland some £11 million in piers and harbours grant in the past five years.

Our policy is to allow the private sector, wherever appropriate, to deliver the necessary services, but I have been asked why CalMac is not being allowed to tender. CalMac is wholly owned by the Secretary of State, and the undertaking with the Secretary of State is to provide an approved lifeline ferry service on the west coast. There is no undertaking to provide services to the Northern Isles. We examined the matter carefully, and it was decided that, on balance, it would not be appropriate to allow CalMac to tender.

A number of factors influenced that decision. First, CalMac's core business is the provision of lifeline services on the west coast; secondly, we believe that the role of the public sector in the economy should be restricted and that, wherever possible, services should be provided by the private sector. Furthermore, the

Government wanted the tendering process to be seen as entirely fair. If CalMac had been allowed to tender on the back of Government funds, that would have been unfair to private sector competitors.