MVA Consultants were hired in 2012 by the Scottish Government to report on the feasibility of a second vehicle and passenger ferry service between Dunoon and Gourock – running the 50% longer and more expensive route between the two town centres, with the vehicle service operated at commercial risk and a state subsidy on the passenger element.
While the conclusion of the study is the clearest example we have seen of ‘result for hire’ reporting, it contains a table [Table 5.1] marrying published carryings data alongside estimated data which, while being largely educated guesswork, is a respectable and useful effort. [MVA GD Study Carryings Table 5.1]
This looks at the relative carryings on the two vehicle and passenger ferry services on this route in 2010-11, the year before the town centres route now operated by Argyll Ferries was reshaped as a state subsidised passenger service alone.
Using figures available from this table and adding in figures from the recently released Scottish Transport Statistics for 2013-14, a clear picture emerges of the direction of travel of the route – in progressive decline.
The state subsidy paid on the passenger-only service runs at around £10 per head per passage – or, in 2013-14’s passenger carrying figures of 299,200, about £3 million a year. Against a route whose decline in usage demonstrates Argyll and Bute’s failing economy – the case for a single multi-purpose private sector service is close to unanswerable.
The latest published figures, for 2013-14, roughly indicate 819 passengers carried per day, on a service providing 58 crossings a day – which is a rough average of 12 passengers per crossing – on a two boat service.
And the Scottish Government is talking about new tonnage for this service?
The performance facts, figures and analyses below could hardly demonstrate more clearly that there is no economic, social or needs argument that can defend the retention of the state subsided passenger service.
The Scottish economy itself is looking very different as the North Sea oil industry struggles with the glut-producing supply-war between OPEC and the USA – and the consequent cliff-fall in the barrell price of Brent crude.
This, and the coming straitened circumstances of public funding makes the opportunity cost of the state subsidy for the demonstrably unnecessary Gourock-Dunoon passenger service route, a matter for serious interrogation.
Before the move to a passenger only town centres service
In 2010 the operator of the town centres route was Cowal Ferries, like Argyll Ferries a member of the state owned David MacBrayne Limited group. The vehicle carrying element was unsubsidised, the passenger service subsidised. There were heated debates about the accounting practices employed, with the two services on the same vessel.
It was shown that that state subsidy for the passenger service was being treated for accounting purposes in a manner resulting in an illegal subsidy finding its way to the vehicle carrying service. This saw the uncompetitive vehicle service on the longer town centres route dropped in the retendering of the service in 2011.
The private sector operator, Western Ferries, ran [and runs] a very successful and wholly commercial-risk vehicle and passenger on the shorter route between the outskirts of the two towns. It owns both of its own linkspans and so does not have to pay passenger and berthing fees to any other company.
However, Western is not a stripped-out profit-taker. As infrastructure owner and operator, it has overarching responsibilities to its staff and maintains their facilities in Hunter’s Quay, McInroy’s Point and Kilmun. Hunter’s Quay and McInroy’s Point were given a £4m upgrading in 2007.
In contrast, the state-owned Argyll Ferries passenger service owns neither of its berthing terminals, incurring passenger and berthing fees to two different external bodies [CMAL at Gourock and Argyll and Bute Council at Dunoon]. Any other operator offering a town centres route either as a passenger only [subsidised] or passenger and vehicle [commercial risk] service would also have these charges to pay.
The figures given in Table 5.1 for 2010-11 in MVA’s Feasibility Study show Western Ferries carrying by far the greatest number of passengers [1,313,800 to Cowal Ferries’ 499,228]. This commanding lead was driven both by Western carrying very much larger numbers of buses and commercial vehicles 33,000, themselves transporting passengers in drive on-drive off services; and by carrying 564,000 cars where as Cowal Ferries carried 3,462 commercial vehicles and 61,400 cars. Drivers and other car passengers count as passengers because, in each case, they are charged a separate fare.
Cowal Ferries, however, carried the greatest number of pure foot passengers – the walk-on walk-off variety – by 64% to 36% [378,599 to 210,062]. Updating this table to reflect 2013 carryings, and using MVA’s formula, this shows that Argyll Ferries still has the greatest number of foot passengers but the share has moved to 59% to 41% [299,000 to 210,000]. If this trend was to continue to the end of the current tender, Western Ferries could actually be carrying more foot passengers.
Both of these specialisms are understandable.
Western’s outskirts route between Hunter’s Quay [Dunoon] and McInroys Point [Gourock] is much more convenient for vehicles. Western had and has a role in carrying McGill’s buses. This service offers a stay-on-the-bus sheltered passenger service via Western Ferries, direct from Dunoon to the door to the ticket office at the Gourock rail head – and a much shorter walk to the trains than for walk-on Cowal Ferries/Argyll Ferries passengers disembarking at the Gourock linkspan.
Walk-on passengers not using the McGill’s direct passenger service are best suited to the town centres ferry route, although the figures cited below show a rapid decline in the use of the pure walk-on service.
This pattern of usage was the driver of the conversion of the state-provided service to a passenger-only one in 2011, once the Scottish election was well out of the way.
Performance of the passenger only service
Drilling down into the statistics shows a detailed picture of shifting audiences – as well as showing that in 2008, the year of the shocking collapse of the financial institutions, virtually all ferry carryings in Scotland fell – a snapshot of the economic impact of the year when so much began to unravel.
With Scotland’s increasingly ageing population and the loss of people of working age to outward migration from the west coast, ferry carryings have been in general progressive decline for some time.
This has been the continuing case with the state subsidised Gourock-Dunoon town centres passenger service, which has shown falling carryings year on year since its inception in 2011.
In its first year, 2011-12, Argyll Ferries was down 90,028 passengers [18%] on Cowal Ferries’ passenger carryings the year before – but that figure does not allow for the ferry passengers who were drivers and car passengers using the Cowal Ferries vehicle service – which Argyll Ferries as a passenger only service, could not have been expected to retain.
However, starting from its own end-of-year one carryings, this service has continued to show substantially falling usage.
In its second year, 2012-13 it lost 67,900 passengers [16.6%]; and in its third, 2013-14 it lost another 42,100 passengers [12.3%].
The still significant but falling rate of percentage decline would indicate a progressive cutting away to a hard core usage of the town centres route passenger service. There are likely to be several reasons for this decline, for example the local impact of general economic stagnation, a switch to Western Ferries or a switch to McGills’ bus service and what can only be called a spiteful and irrational campaign against Argyll Ferries by the local ferry action group.
One thing is that obvious is that the increased frequency provided by Argyll Ferries since the 2011 tender, as compared to the service provided by Cowal Ferries before the 2011 tender, has not generated a switch away from either McGills or Western.
This failure therefore explains why Argyll Ferries have received an additional subsidy of around £200k over contract price from the Scottish Government. Where actual carryings run 15% or more below the anticipated carrying levels on which an original tender submission was based, compensation for actuality is allowed for in the tender.
While this provision offers protection to the operator, it could also be seen as removing any incentive to succeed and providing one to fail. This would, of course, only come into play were the successful bidder to have been a private sector operator. State owned operators, as exemplified in this particular service, are, by their nature, distanced from success or failure in performance.
The extent to which demand for the Argyll Ferries service justifies the very substantial public investment involved in the state provision and state subsidised fares for this service is now clearly questionable.
As noted in the opening section above, the latest published figures for 2013-14, indicate an average of 819 passengers carried per day, on a service providing 58 crossings a day – which is an average of 12 passengers per crossing – on a two boat service.
With the McGill’s drive on-drive off bus service on the Western Ferries Route from Dunoon direct to the Gourock rail head, there is no defensible financial argument for the Scottish Government to continue with this provision.
Yet the government is talking about new tonnage – which on the economics, is cloud-cuckoo land – and has encouraged the Dunoon-Gourock Ferry Action Group to seek out this ever more familiar bird.
And if it this is not a fantasy, how will the government defend spending upwards of £3 million per annum on a two boat service carrying on average, 12 passengers per crossing – and then add the cost of new tonnage?
Overall route performance with the present dual service
If one adds the carryings of the two current services to examine the picture of continuing demand for the route, the picture is additionally interesting.
Year-on-year, the overall totals still show a progressive decline – and that is in spite of Western Ferries showing a steady growth, meaning that it is the failing performance of the passenger service that is the drag.
In 2011-12, the first year of Argyll Ferries and Western Ferries in simultaneous service between Dunoon and Gourock was 71,128 passengers [4%] down on the passengers carried the previous year by Western and Cowal Ferries.
While Western Ferries’ car carryings were up 13,700 [2.4%] on the last year, 2010-11 [when there were two vehicle carrying ferries on the route], the car carryings for the route as a whole were down by 47,700 [7.6%] in 2011-12, although Western’s growth will have taken up some 28.7% of that loss.
The almost universal ‘bonus year’ for ferry carryings on the west coast, 2012-13, saw the dual service route as a whole lose only 11,300 passengers [0.65%]; and Western’s car carryings grow by 27.600 [4.77%].
The following year, 2013-14, compared with this monster year, saw the loss of 88,700 passengers [5.12%] and Western drop 27,000 car carryings [4.46%]
But if one takes that exceptional year out of the picture and compares the 2011-12 performance with the 2013-14 performance, the total passenger carryings were down 100,000 [5.74%]; while Western’s car carryings were up 600 [0.1%].
It could not be clearer from the overall nature and demand for ferry services on this route that there is gross overcapacity; and the failing service is the unnecessary and very expensive state subsidised passenger service..
Western’s ability to make a profit on a well managed private sector business with a 4-boat shuttle on a 20 minute crossing while keeping passenger fares at and often below those charged on the state subsidised service, indicates strongly that it is capable of serving demand as the sole service provider on the route.
What argument against this saving to the public purse in Scotland can survive an honest cost-benefit analysis?