Pete Bevington

17 April, 2008

THE EUROPEAN Commission yesterday (Wednesday) opened a formal investigation into the way the Scottish Government subsidises ferry operators NorthLink and CalMac.

The move comes eight years after the first complaints to the EC, and one month after SNP MEP Alyn Smith urged the commission to get stuck in.

Yesterday Mr Smith explained he was taking the “unusual step” of calling for his colleagues to investigated, because he thought it essential for clarity on the issue to give the ferry services long term stability.

EC vice president Jacques Berrot said they needed to make sure the current subsidy schemes do not fall foul of state aid rules, and in particular that there had been no “overcompensation of undue distortion of fair competition”.

Monsieur Barrot said: “I am well aware of the importance of lifeline ferry services to ensure the survival and prosperity of isolated island communities in Scotland. This is actually a very important reason why we should ensure full compatibility with EC law and provide legal certainty for the way these services are organised.”

The EC has already carried out a preliminary investigation following allegations that state aid rules had been breached. Yesterday’s decision formally opened the investigation procedure.

The commission is not questioning the need for regular, affordable lifeline ferry services to the northern and western isles, and is not threatening to close them down. It wants to ensure the subsidy schemes to support them are “proportionate to such public interest objectives”.

The UK government has been given two months to reply to the EC, which will shortly publish its decision in the EU’s Official Journal for comment by interested parties.

Yesterday Mr Smith welcomed the decision to investigate “the legacy of Scotland's ferry policy the SNP government inherited on taking office”.

Mr Smith said: “This will give everyone clarity, a clear timescale and process to argue this case, and I have no doubt that the SNP will argue this robustly with a view to obtaining a stable future for Scotland's ferry users and companies.

“We have nothing to fear from a robust argument in a formal legal setting, and I have every confidence that these proceedings will remedy the guddle the SNP government inherited."

The SNP at Holyrood have made it clear they are not happy with the situation they inherited from the last Labour/LibDem Scottish Executive, particularly on the Gourock/Dunoon route where a subsidised CalMac service competes against unsibsidised Western Ferries.

A similar situation pertains on the Pentland Firth with Pentland Ferries argue they face unfair competition from the subsidised NorthLink ferry Hamnavoe.

Shetland MSP Tavish Scott was the last transport minister before the SNP took over in Edinburgh last May, and oversaw the re-tendering of the NorthLink contract.

Yesterday Mr Scott called for the inquiry to be completed quickly. “While they have to respond to a complaint, I don't believe that such an investigation will do anything other than confirm that these services are compliant with the appropriate rules.”

Meanwhile the David MacBrayne Group, which includes both NorthLink and CalMac Ferries, welcomed the approach being taken by Europe towards the controversy.

Chairman Peter Timms said: "We will be happy to cooperate fully with this investigation and will help the Scottish Government to provide the commission with all the information required to meet the aims of the investigation.

"We fully understand the issues involved and that the commission requires more information to check that the mechanisms used in recent years do not fall foul of funding rules.

“We also welcome the confirmation that the EU investigators are aware of the importance of lifeline ferry routes to the many isolated communities in Scotland that our group companies serve.

“It has always been our first priority to maintain and develop the services to the communities we serve, and hopefully this investigation will clarify any outstanding issues which remain about the way these services are funded and how we operate.”