Should Scottish ferry services stay in the public sector?

Should Scottish ferry services stay in the public sector?

Issued: Wed, 09 Mar 2016 11:19:00 GMT

A significant case for keeping Scottish ferry services in the public sector has been commissioned by the Rail, Maritime and Transport Workers Union (RMT).  Jeanette Findlay, Senior Economics lecturer at the Adam Smith Business School, produced the report as public concerns continue to grow surrounding the tendering outcome of the 26-route west coast ferry network currently operated by CalMac Ferries Ltd.

The Clyde & Hebrides Ferry Services (CHFS) is a vital lifeline service for many of Scotland’s Highlands and Islands communities and CalMac are a familiar sight around these west coast shores.  The current contract is out to tender at present with both CalMac Ferries Ltd and Serco Caledonian bidding.  The public sector faces serious competition from the private sector for the £1 billion subsidy to operate the ferry routes.

The RMT have welcomed the report by Jeanette which seeks to examine the relative merits of both bidders.  The report considers the attributes of CalMac and Serco in terms of their direct experience of operating ferry services in Scotland, any other relevant experience and evaluates the extent to which both companies might, in running the CHFS, contribute to other policy objectives set out by the current Scottish Government.  The report also looks at the costs associated with the competitive tendering process and the long term implications of both possible outcomes.

The report states that CalMac Ferries Ltd have ‘operated in an efficient, innovative and strategic way in the conduct of the CHFS contract’ and have also returned over £10million since 2007 to Transport Scotland as a result of efficiency savings that they have made.  In contrast, the report looks at the troubled history, in relation to public sector contracts, that the Serco Group has had – in 2013 Serco had to pay back £68.5 million to the Government for overcharging on its contract with the UK Ministry of Justice.  Serco also has limited experience within the maritime industry and has a poor track record of maintenance, staff training and safety. 

The report also justifies the Scottish Government’s decision to invest in excess of £300million until 2022 in new vessels, ports and harbour infrastructure and maritime training, much of which is in relation to the Clyde and Hebrides routes that will benefit whichever provider wins the contract.  Following the report, Steve Todd, RMT National Secretary said: “handing this jewel in the crown to Serco would be a scandalous betrayal of CalMac workers and passengers, not to mention the Scottish taxpayer.”

A successful bid by Serco Caledonian could have a devastating effect on the Scottish economy.  There is the potential for a considerable amount of job losses within CalMac as well as a loss of millions of investment done by CalMac and the Scottish Government on the shipping infrastructure.  RMT general secretary Mick Cash, in a foreword to the report, said: “Privatisation would undoubtedly result in CalMac workers, passengers, communities and businesses paying for Serco’s business model of service and jobs cuts to maximise profit.”

Micky Smyth, from Nautilus International, has said that Scottish ferries need protected from ‘the race to the gutter which has affected so many other sectors of the shipping industry’ and added that the repeated tendering process is ‘not only disruptive and unsettling, but is also unnecessary and expensive’ – with the 2007 tendering having cost Scottish taxpayers more than £15m.

“Tendering opens the door to cut-throat operators and puts pressure on existing service providers to find short-term cuts that have long-term consequences.  The effective privatisation of services that are essential to remote and isolated communities can give the green light to aggressive profiteering at the expense of passengers and service users.”

With the final bids being lodged this month all eyes are on the Scottish Government to safeguard the operation of these lifeline ferry services.

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