Scottish Government in row over removing RET fares from hauliers

For Argyll has seen a powerpoint presentation by Transport Consultants, MVA, retained by Transport Minister, Keith Brown – at a cost said to be around £60,000, to report on the impact of the removal from hauliers in 2012 of Road Equivalent Tariff fares to the Western Isles, Coll and Tiree.

The consultants interviewed hauliers and other business interests. They conducted an online survey of 49 additional  businesses and used a focus group as a control group to test responses from the other groups consulted.

The issues they looked at included:

  • Supply chain linkages
  • Intra-regional impacts
  • Economic and social impacts
  • Costs to the taxpayer – although interestingly, this is one section carrying no information whatsoever and described merely as ‘to be completed’.

Discussions with the hauliers

These focused in part on the interrogation of whether or not the hauliers had passed on the savings they benefited from when they were given the subsidised RET fares in 2008.

The Scottish Government claimed they had not and consequently withdrew the privilege from hauliers of RET fares, while leaving them in place for other business, residential and tourist ferry users.

In the interviews with MVA the hauliers insisted that they had passed on the savings, if not in lower at least in stable charges. While having sympathy with haulage businesses beset by ever rising fuel costs – and the highlands premium – one has to think ‘Hmmmm’ on hearing this reasoning.

The savings on RET fares over the period were substantial and inflation has, at the same time, been contained. Keeping ‘stable charges’ may not equate to passing on the savings . However, it would be fair to share these savings since the point of RET is to fund a legitimate way of supporting sustainable life for remote island communities – and that life includes a viable and reliable supply chain.

Other issues discussed with hauliers and business folk were the ferry fare discounts available to hauliers before RET, which replaced them; and the fact that those businesses shipping out – or in – high volumes of more expensive goods have had more chance of absorbing the cost of the loss of RET than those transporting low volume, low value items with low profit margins.

The core trouble is that for over four years, the pilot RET programme has accustomed islanders and businesses of all kinds serving the islands to the luxury of a sudden cut in their familiar ferry fare levels.

It was never going to be possible to reverse this situation, once deployed – and indeed the Scottish Government extended what was initially a 30 month pilot period.

In that sense, while one can understand government annoyance if the hauliers were seen not to have played a straight bat with the opportunity they were given but to have creamed it off, psychologically and politically there is no real way back.

The loss of their RET fares has indeed, as they told the consultants, coincided for hauliers with the hit of the economic downturn. Having budgeted on RET fares for three years or so and having assumed that this was a stable financial base to work from, it is easy to understand how genuinely winded this business sector must feel at the sudden withdrawal from it of RET fares.

Had the Transport Department monitored the post-RET pricing of the hauliers annually from its introduction, their business practice in this situation could have been painlessly aligned with the government’s reasonable expectations in good time.

The actual loss of RET in 2012 was aggravated by the height of the cliff face that had been created by practices that had gone unmodified since 2008.

The consultant’s conclusions

MVA say that evidence suggests that RET had a positive impact on the economies of the Western Isles, Coll and Tiree. Of course it had. How could it not?

They say that its removal will lead to higher haulage charges for island customers. There is no doubt it will – but this does leave the haulage industry to explain why they can immediately hike haulage charges when their fares go up – but did not find it helpful to reduce them when those fares went down substantially from 2008 onwards.

Indeed, if haulage charges have remained the same as before, it could be argued that there is no foundation for raising them now. But that is a logical position and we have to talk real politique.

RET trained people for easier times and they are now resistant to what they see as imposed hardship, regardless of whether or not they behaved as they had been expected to do.

And that raises the issue of whether it was initially made explicit to hauliers that government expected them to pass on savings to their island customers.

Don’t forget that the Transport Minister of the day was Stewart Stevenson – not the most engaged of ministers; and the one who lacked the courage to tell Dunoon the truth about its future town-centre ferry provision to Gourock. Stevenson might have left it to the hauliers themselves to divine the need to pass on the savings made from RET ferry fares.

The consultants point out that higher transport charges will have a negative but asymmetric impact on island economies, hitting hardest marginal sectors in more vulnerable communities. This too is obvious. Those with least shelter are most exposed to the storm.

The varieties of solution – or ‘emerging conclusions’ – proposed by the consultants, MVA, all have one direction – to find ways of reducing again the ferry fares of the haulage industry.

The strategies considered to achieve this are:

  • Return to RET
  • Volume based discounts
  • Multi-journey tickets
  • Targeted approach – which we assume means a degree of selectivity

And ‘non-fares solutions to underlying economic problems’ ia given as an alternative. What might such solutions include? Shipping islanders wholesale to the mainland?

Transport Minister’s reception of the consultants’ report

With ferry fares due to rise by another 10% in March, hauliers having already faced a 50% rise with the loss of RET last year, Transport Minister, Keith Brown, is playing hardball and sticking to his guns, insisting that hauliers’ fares will rise by 10% in March. This would see the sector taking a total 60% rise on their transport costs in six months.

The level of this unanticipated hike in transport costs could not have been factored in to business planning by the industry and, in that, their real pain is inevitable.

We see the situation as born of an initial failure, before Mr Brown’s tenure, to think actions through to consequences. We do not hold his predecessor Stewart Stevenson wholly responsible for this because he did not devise RET. That was handed down by the Cabinet Secretary for Finance, although the Transport Department will have had the implementation to do.

The bottom line is that the very logic of the device introduced by the government itself obstructs any discrimination against the hauliers, whether or not they pass on savings to their island customers.

RET is about pricing ferry fares at the cost of an equivalent journey by road. To remove that from the hauliers is, perversely, to say to them: ‘Everyone else will drive direct from Oban to Scarinish [Tiree] – but you’ll have to go round by Wick.

With the independence referendum coming up on the inside rail now, due on October 2014, and giveaways and promises the name of the game, we anticipate that Mr Brown will take the road to Damascus before March.

The two major opposition parties at Holyrood are calling for reversals and apologies from the Transport Minister.

Political responses: Press Release from Jamie McGrigor MSP

Jamie McGrigor, Highlands & Islands Conservative MSP, has welcomed the release of the report from Transport Consultancy MVA into the Scottish Government’s highly controversial decision last year to remove RET (road equivalent tariff) from commercial vehicles in the Western Isles, Coll & Tiree. This policy decision led in many cases to a 50% haulage fares rise, with fares due to rise by another 10% in March. The report concludes that the removal of RET was “having a negative impact across all islands/areas”, particularly on the more remote islands.

Commenting, Jamie, who made repeated representations to Ministers on this subject on behalf of concerned constituents and remained in close contact with representatives of hauliers and other sectors including crofting, said:

‘This report is to be welcomed and entirely vindicates the clearly expressed views of local hauliers and businesspeople in the Western Isles, Coll and Tiree that the introduction of RET on commercial vehicles had had a positive impact on the local economy and had been passed on by hauliers to other sectors. The claims of Scottish Government Ministers that the benefits of RET had not been passed on by hauliers have been shown to be completely inaccurate.

‘The Transport Minister should now apologise to my constituents in the Western Isles and Coll and Tiree for instigating a policy change which has caused real harm to the economies of these fragile communities. He also needs to set out urgently how he will respond to the report’s findings and what action he will now take to support hard pressed local hauliers and businesses.’

Political responses: Press Release from Scottish Labour

Scottish Government Ignores Report on Ferry Fare Hikes

Transport Minister Keith Brown has been called on to explain to Parliament why he ignored his own consultants report on the removal of RET from commercial vehicles and the impact of fare increases. RET, the Road Equivalent Tariff, is a subsidy scheme for ferry fares which was intended to make them equivalent to the cost of travelling by road.

The report, which Scottish Labour understands was commissioned at a cost of some £60,000 to the taxpayer, found that the removal of RET from commercial vehicles had resulted in higher costs for island households and businesses, was having a negative impact on all the island communities affected, had cost jobs and was particularly damaging for the most vulnerable communities.

Richard Baker MSP, Shadow Cabinet Secretary for Infrastructure, Investment and Cities, said:

‘Keith Brown has some serious explaining to do to our island communities and Parliament. Why has he frittered away some £60,000 of taxpayers money on a consultants report when it is clear he had no intention of taking its finding seriously?

‘The report by MVA consultants showed that the removal of RET for commercial vehicles has resulted, as we predicted, in higher costs for island households and had a negative impact particularly on the most vulnerable communities. It has also cost jobs which is a very serious issue for fragile island economies.

‘Despite this study, Keith Brown has announced he will not restore RET to commercial vehicles and instead put fares up for them by 10% in March – meaning a massive 60% increase in fares for these vehicles within six months. we also know there will be an impact on island communities thanks to the 8.2% increase he has imposed on passenger fares.

‘The study also showed that firms had indeed passed on the benefits of commercial vehicles receiving RET – despite SNP claims they had not.

‘This whole episode is another sorry example of a Scottish Government which is not listening and is letting our island communities down.’

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One Response to Scottish Government in row over removing RET fares from hauliers

  1. Yet another report, undertaken at huge cost, apparently completely ignored by the SNP government. The behaviour of the SNP shows many examples such as this, with results of consultations ignored and the overturning of local decisions. I often wonder if they have any respect at all for the views of people living and working in Scotland.

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