The ’emerging’ findings of the consultants report on the ‘Impact of the Removal of Road Equivalent Tariff [RET] Fares from Commercial Vehicles on The Western Isles, Coll and Tiree’ have to be read.
They could hardly present a more damning account of a government given to rash and ill-considered action, based on untested and damaging assumptions and leaving a trail of economic damage to which no clear answer has yet been found.
At the end of the report, the consultants recommend more work for themselves to help to get to a point where the most effective solution might be found. Opportunist as this may be, to a degree, the story they have to tell supports that recommendation. This study is lucid, clear eyed, objective and relatively unfudging – or rather, if it is a fudge, the situation is even worse than it appears.
So what is it all about?
We will all remember the Scottish Government’s selective introduction in October 2008 of Road Equivalent Tariff [RET] ferry fares to the Western Isles and including the Argyll Isles of Tiree and Coll.
This created asymmetric tourist and commercial freight and haulage markets, with fares to some west coast islands significantly cheaper than the fares to others; and with an initial pilot period of 30 months, progressively extended well beyond that time – by a year.
It was noted, with well founded cynicism, that the extensions to the pilot scheme took the heavily subsidised service well clear of the Scottish parliamentary elections in May 2011.
Excluded islands – like Colonsay – were deeply anxious that the length of the pilot phase was capable of establishing a pattern of repeat visits to the cheaper-to-reach island destinations – a pattern that could act to its own enduring detriment.
The original RET scheme included passengers, vehicles and commercial vehicles – and abandoned the former discount schemes where:
- multi-journey tickets could be bought
- and where commercial vehicles [CVs] enjoyed a Traders’ Rebate Scheme [TRS].
This last discount offered all commercial vehicle operators a rebate based on the pattern and volume of their carryings on a particular CalMac west coast ferry route.
Many regular non-CV users on particular routes found that RET was no cheaper than the cost per journey they had previously enjoyed in buying multiple journey tickets.
But in general, as this study confirms, the introduction of RET led to greater economic activity, business confidence and stability in the island economies to which it applied.
Then, in April 2012, the pilot came to the point of review.
And Transport Scotland ran off at the mouth
At the end of the pilot scheme and without consultation or considered research, they publicly announced profound disappointment that hauliers had not passed on to their clients the transport cost savings they were making under RET.
This further inflamed already disgruntled clients who rather felt the same way about what had been happening and, instead of being given a measured and reasoned account of the performance of the Commercial Vehicle sector, had their disaffection aggravated by the premature and ill-founded government assumption.
The hauliers were officially demonised, with clearly punitive public threats – which were carried out – to remove RET for Commercial Vehicles and to return their fares to a non-RET level.
There was instant shock and anger from the CV sector, saying that while they had indeed not passed on their transport savings from RET fares, they had used that to hold their prices stable at pre-RET levels, against steeply rising fuel costs.
This was pooh-poohed as a transparent fiction and RET fares were removed for Commercial Vehicles – and without the restoration of their former Traders’ Rebate Scheme [TRS].
In the period between then and now, the eminently analytic and responsible Outer Hebrides Commerce Group has consistently warned of the precise consequences this study identifies in the withdrawal of RET fares from the commercial vehicles on which the lives of island communities depend.
It was belittled and rubbished by government and by government politicians for its pains.
Its coordinator, the respected Gail Robertson, is reported as saying now: ‘We are pleased that after months of delay the Transport Minister has finally published this study. It is an instructive document that clearly shows the devastating, negative impact the removal of cheaper fares are having on island families and businesses. We can appreciate why Transport Minister Keith Brown was reluctant to publish this document. It nails and dispels many assertions that were untrue.
‘We do hope that all elected politicians take time to read it. For some, this report should give cause to hang their heads in shame, for others, we hope it encourages them to keep campaigning until the Scottish Government puts an equitable ferry fares system in place. We will be issuing a further, detailed response next week’.
While it was the government’s intention to move directly to pre-RET 2008 fares, it was impressed upon it that an immediate move from RET fares to non-RET fares for commercial vehicles would be economically disastrous in the altitudinous rise in costs such a gear crash would inflict.
By then, too, the Autumn 2014 Independence Referendum was on the horizon.
The Scottish government consequently accepted a suggestion arising from the early findings of the consultants investigations and introduced a transitional fares arrangement to last until 2014, in which fare rises were limited to 10% across all routes.
The study proceeded and what it describes as its ’emerging’ findings have now been released.
Its further findings will contribute to the Scottish Government’s identification of its preferred address to the current situation in the commercial vehicle sector.
However, we confidently predict that, with the two year transitional fare arrangements coming to an end in April 2014 and the Independence Referendum now set for 18th September 2014, there will be an extension to the transitional fare arrangement to carry the impact of the loss of that easement clear of the date of the independence vote.
The emerging findings
The study has found that the introduction of RET, in all cases but one, produced an economic upturn in the relevant island economies, with markedly increased ferry carryings, stable transport costs and with businesses reporting greater competitiveness in their performance and more confidence in investing to grow their services and their markets.
The exception to the rule was the Argyll Isle of Coll where the volume of available accommodation, for example, did not support an increase in visitor traffic, although commercial traffic had increased a little.
Conversely, when RET was summarily removed from the Commercial Vehicle sector, ferry carryings substantially decreased, costs went up and there were demonstrable strains in island business activity, particularly – and reasonably – amongst those businesses operating at low volume or transporting low value items, even in volume.
The study underlines the fact that the removal of RET will make such businesses – the majority genre on the islands – progressively uncompetitive as fares revert to non-RET levels.
The report says that:
- On each route other than Oban / Castlebay / Lochboisdale, in the six months following the removal of RET carryings declined, compared to the same six-month period in the previous year. The decline ranged from 17.5% on the Oban / Coll / Tiree and Ullapool / Stornoway routes, to 7.2% on the Uig /Tarbert / Lochmaddy route.
- Over the same period revenue increased by over £380,000.
The findings uphold unequivocally the position advanced by the hauliers, saying:
- The evidence demonstrates that hauliers maintained transport charges at their 2008 level throughout the RET pilot despite total costs increasing at above-inflation rates. As a result of that approach transport charges to businesses remained constant over the RET pilot period but, with general inflation also rising, transport charges to businesses declined in real terms.
- ‘Areas with a large share of enterprises in the primary sector will likely be adversely affected most. The Western Isles, Coll and Tiree as a whole have a proportionately higher share of enterprises within the primary sector. This is the case, particularly in the Uists, Benbecula, Barra, Coll and Tiree where the figure is as high as 38%. It will leave these areas more vulnerable as they already face higher than average transport charges due to the lower number of hauliers in the area and less competition in the haulage market.
- Many of the businesses in the Western Isles, Coll and Tiree are concerned that the lack of certainty and frequent policy changes on CV fares are having a detrimental impact on business confidence and long-term investment planning. Businesses stress the need for a clearly defined longer term fares strategy by the Scottish Government.
This last point is best summarised as the report’s identifying the ‘headless cbicken’ syndrome in government behaviour on this matter – and the consequent paralysis this is inflicting on the vulnerable business communities RET had been designed to support and sustain.
A thumbnail analysis of the balance sheet in the transitional phase reports:
‘RET for CVs cost the Scottish Government around £3m per year. The total reduction in annual cost to the Scottish Government associated with removing RET is estimated to be £1.5m with the transitional scheme costing the Scottish Government around £2m in 2013. The extent to which this impacts on the Western Isles, Coll and Tiree will depend on how much these costs can be passed on to customers out with the islands concerned. The impact on the Western Isles, Coll and Tiree will also depend on how much they can actually be absorbed by businesses. For example, if businesses cannot pay the higher charges, this may lead to loss of activity and a reduction in employment, resulting in an impact which is greater than the change in fares.’
The sobering summary research finding presents the picture of a general economic downturn in Scotland made worse for these island communities by the progressively negative impact of the withdrawal of RET fares from commercial vehicles. The report says:
‘The economies of the Western Isles, Coll and Tiree, similar to many areas of the country, are suffering from the general economic slowdown which is impacting on activity and individual business performance. The poor macro-economic situation coincided with the removal of RET ferry fares for commercial vehicles in April 2012. The combination of both events happening together has made it difficult to isolate the impacts of the removal of RET fares for CVs. Despite this however, based on the evidence and views gathered it is concluded that the removal of RET has had a detrimental impact on the local economies of the Western Isles, Coll and Tiree.’
The evidence from this study shows that the government:
- did not adequately consider the economic impact of the loss of RET in island economies that had come to depend upon it over the four year period of its operation;
- did not reflect upon the reality of the costs facing hauliers from sources other than transport costs – despite the fact that the constant hiking of fuel costs has been a running and well documented sore;
- has developed no stable policy on RET fares or on managing the role of RET fares for the commercial vehicle sector;
- has acted impulsively and without secure evidence in rashly punishing the commercial vehicle sector for its assumed capitalising on the cheaper RET fares;
- is driving a political agenda which is distorting the evolution of sound economic development strategy;
- has absolutely no idea what to do now.
Read the report
It has very much more to say than we can even hope to summarise – but it is not long and it is lucid, plain speaking, concise and thoughtful – one of the best of such studies we have seen.
We recommend also the reading of an account of this matter in this first class blog by journalist Iain Maciver -and the comments that follow it. Together these are signally informative on what has actually been going on and on the all-but universal responses to the situation.