Scottish Energy in the 21st Century

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Mr. Peter Duncan (Galloway and Upper Nithsdale): I feel a press release coming on.

David Cairns: If I can quote the hon. Member for Galloway and Upper Nithsdale (Mr. Duncan) on my press release in support of that bid, I will be happy to do so.

On the level of the subsidy, the Minister may be able to correct me but I cannot think of a comparable project that enjoys such generous subsidy. It is important to reject the laissez-faire approach of the Conservatives, but surely it is equally important to be judicious in setting high standards for proof of the economic benefits when deciding whether to give subsidies and at what level such subsidies should be fixed. I know that some have tried to make political capital out of the issue of which budget the subsidy will come from, but surely the important point is that every pound in subsidy is a pound of taxpayers' money and must be spent wisely. I should be grateful to my hon. Friend if he would outline the economic benefits that he believes would justify the generous level of subsidy.

Mr. Reid: I am grateful to the hon. Member for giving way a second time. I must point out that the Scotland Office and the Department for Transport, Local Government and the Regions have refused to pay the subsidy. The subsidy is being paid by the Scottish Executive. The difference is that there are Liberal Democrat Ministers in the Scottish Executive. That shows once again, just as with tuition fees and free personal care for the elderly, that it is Liberal Democrats who make the difference.

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David Cairns: The hon. Gentleman fails to acknowledge that every penny that the Scottish Executive spends comes from the Government. It is because the Labour Government have increased spending in all parts of the UK, especially in Scotland, and because of their sound economic management, that the Scottish Executive have generous amounts of money to spend in the variety of ways that he mentioned.

I appreciate that local economic judgments are matters for the Scottish Executive, but it would be interesting to know if the Scotland Office has made a contribution to the assessment. As the project is going ahead--presumably the answer was positive--is it the Minister's understanding that the value-for-money assessment will continue throughout the first five years of the project? As we move through the five years, I hope that much thought will be given to ways in which other parts of the west of Scotland can exploit the opportunities that the new ferry will bring.

In an ideal world, all ferry services to Northern Ireland, the Republic of Ireland and all points west and south would sail from Greenock and be operated mainly by the Gourock-based Caledonian MacBrayne. I accept that we are a little way off that ideal but, until such a glorious day dawns, there may nevertheless be ways of linking both passenger travel and, perhaps more likely, freight into the Campbeltown ferry from elsewhere. As such, the Minister should consider a successor committee to the ferry action group that played a key role in delivering the project. It could involve businesses and representatives from surrounding areas, promote the benefits that the new ferry will bring and seek ways to extend those benefits to the rest of the west of Scotland.

Although some significant hurdles must still be overcome, the process of securing the ferry is a triumph of the collaborative approach involving the Scotland Office, the Scottish Executive and the Northern Ireland Executive. The collaboration extended across the political divide.

Angus Robertson: Just for clarification, do you agree with your hon. Friend who, on 7 December—

The Chairman: Order. I remind the hon. Gentleman that he must address the Chair.

Angus Robertson: My apologies.

Does the hon. Gentleman agree with the Minister of State, Scotland Office, who said on 7 December that rather mean Liberal Democrat members of the Executive were hindering progress? Does that analysis still stand?

David Cairns: The hon. Gentleman is tempting me to intrude on relations in the Scottish Executive, which are entirely a matter for its various partners. I was hoping that he was about to congratulate the Minister on achieving a result that is of tremendous benefit to the people of Argyll and beyond, and to Northern Ireland. It was sad that rather than doing that, he tried to score a petty political point. It was sad but not atypical of—if not his approach—the approach of his party.

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This project was a good collaboration that put the needs of local people and businesses first across the political divide. I applaud the Scotland Office for its pivotal role in that success, and hope that it can be built upon to bring greater benefits to the whole of the west of Scotland.

1.13 pm

The Minister of State, Scotland Office (Mr. George Foulkes): I congratulate my hon. Friend the Member for Greenock and Inverclyde (David Cairns) on securing the debate, on making an excellent speech and on powerfully putting the case for the facilities in his constituency. I hope that that case will be heard by those who will take the matter forward and that it will be taken up seriously.

As my hon. Friend said, huge support has been shown throughout the process from members of communities in Kintyre and beyond in Scotland and Moyle and beyond in Northern Ireland. That support was shown not for the reinstatement of the ferry—because we do not want it as it was previously—but for a properly funded, full-time operation for the route. The Secretary of State and I are proud of the role that the Scotland Office has played. There have been some gibes from the side, and we are hearing them again today, but it is true that—I was going to say that the project would have not got off the ground, but that is perhaps not the best analogy—it would not have set sail had it not been for my predecessor, my hon. Friend the Member for Cunninghame, North (Mr. Wilson), the current Minister for Industry and Energy. Some people have not been prepared to give him the credit for that, but I am.

My hon. Friend the Member for Greenock and Inverclyde alluded to the fact that some people have asked why my right hon. Friend and I—and our predecessors at the Scotland Office—have spent so much time on this matter. The answer to that question is because that ferry service is important. It matters to the people of Kintyre and of Moyle.These are sparsely populated rural areas that are located far off the beaten track. They are among the most deprived areas in the United Kingdom, with high unemployment and static or falling populations. Many hon. Members will recall the impact of the winding down of the Royal Air Force base at Machrihanish as the cold war ended, and the recent closure of the Jaeger factory. Those events were, in part, symptoms of the broader problem of Kintyre's geographical peripherality; a problem that is shared to a lesser extent by Moyle.

There is a website for Kintyre that promotes the attractions of the ''Wee Toon''—as it refers to Campbeltown—as the ''nearest place to nowhere and the furthest from anywhere.'' That is how the local people describe their town, but it sums up the problem that Campbeltown faces.

However, despite their relative isolation, both areas have huge tourist potential. The golf course at Machrihanish is one of the hidden gems of Scotland's embarrassment of riches with regard to that sport.

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Moyle contains the Giant's causeway, one of the wonders of the world. Both Moyle and Kintyre offer opportunities to truly appreciate their scenery and tourist attractions, as the Bushmills distillery is located on one side of the Irish sea and the Springbank distillery is located on the other side.

A guaranteed and sustainable ferry service between Ballycastle and Campbeltown has the potential to transform both towns from being perceived as on the road to nowhere to being at the centre of an exciting new tourism and business link between the highlands and islands and Northern Ireland.

Mr. Peter Duncan: The Minister and I share a constituency interest in crossings between Northern Ireland and Scotland. Will he assure me that similar consideration is being given to the ongoing financial viability of crossings from Stranraer as is being given to the viability of the route under discussion?

Mr. Foulkes: As far as I am aware those crossings are currently commercially viable, and they will remain so, judging by the number of buses that pass through my constituency carrying supporters of two well-known Glasgow football teams.

Mr. Duncan: Is Partick Thistle one of them?

Mr. Foulkes: No. However, the operation between Campbeltown and Ballycastle is on a different scale to the service from Stranraer.

How did the Scotland Office get involved in the matter? As my hon. Friend the Member for Greenock and Inverclyde said, my predecessor, my hon. Friend the Member for Cunninghame, North, was faced with a difficult situation. Sea Containers, which had run summer-only commercial operations on the route since 1997, were encountering heavy losses. It was becoming clear that the service would not run in summer 2000.

There had been criticism of the way in which the summer-only service had operated. Astonishingly, in one year, there had been a gap in the service in mid-season so that the ferry could take visitors to the Isle of Man for the TT races. That is not a reliable ferry service.

On top of that, Ballycastle and Campbeltown had new, publicly funded and excellent port facilities that were in danger of becoming permanently redundant. Several public bodies were asked to assist. However, any effective effort had to involve both Scottish and Northern Irish interests. With the blessing of the Northern Ireland Office and the then Department of the Environment, Transport and the Regions, the Scotland Office was in a uniquely advantageous position to co-ordinate the response. It took in hand the immediate task of trying to get Sea Containers to continue to operate on the route, and if that was not possible, to identify new operators to run commercial services. Many discussions were held through the latter part of 1999 and the first half of 2000 with Sea Containers and other potential operators, but during the discussions it became clear that the service was not commercially viable, and that it could not continue without public subsidy.

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Throughout the entire process, I have been struck by the fantastic support that the local communities in Northern Ireland and Kintyre have given to the project of getting the service properly up and running. My predecessor capitalised on that by convening an action group in July 2000 to consider the way forward. Membership of that group included local councils in Argyll and Bute in Scotland, and in Moyle in Northern Ireland. It also included the local enterprise company and tourist board. What was most heartening in such a cynical time in politics was that the action group had the active membership and support of local Members of all parties in this House, the Scottish Parliament and the Northern Ireland Assembly. The group also included the Scottish Executive and the Northern Ireland Executive.

Once we identified that the service could operate only with a public subsidy, the first task was to investigate whether a subsidy could be paid in law. As many hon. Members know, strict European single market legalisation governs the use of public money to subsidise industry, and maritime services are no exception. However, a subsidy may be allowed under certain conditions. If the subsidy is to help provide a lifeline service or to assist economic development in peripheral areas, a member state Government can declare a public service obligation. Again, with the blessing of the relevant Departments, the Scotland Office made direct contact with the European Commission Energy and Transport Directorate-General to ascertain whether a PSO could be declared. That is no easy matter, and it was made more complicated by the fact that there is no formal approval mechanism; just an obligation by the Commission to investigate suspected infringements.

Following discussions with Commission officials, and with the evidence provided by consultants employed by the action group, the Commission officials agreed informally at the beginning of 2001 that a ferry service would not infringe state aid legislation. The Scotland Office initiated that significant step forward, without which the tendering process could not have started. I confirm that £1 million a year—the final agreed subsidy for the tendering process—will result in the highest per capita support for ferries anywhere in Scotland. The Scottish Executive and the Northern Ireland Executive have made a major commitment. I repeat my tribute to my colleague in the Scottish Executive, Wendy Alexander, for making a bold decision to go ahead with that.

In response to the question asked by the hon. Member for Moray (Angus Robertson), I mentioned that there was a story that the Liberal Democrats opposed the tender; that was reported, as the hon. Gentleman rightly said. When the Deputy First Minister assured me that Liberal Democrats supported it, I immediately withdrew that allegation. The hon. Gentleman should quote both parts of my comment. There have also been several comments in the press from some quarters about alleged feuds between the Scotland Office and the two Executives,

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and about one side or the other dragging its feet. As I speak, I am looking at the quarter that made those comments.

Sir Reg Empey is the Northern Ireland Minister for Enterprise, Trade and Investment and is a great friend of the ferry service. In response to the Government's announcement last month, he said that the proposal was about partnership in action and Governments working together for the benefit of the local economies in both Scotland and Northern Ireland. That was a ringing endorsement from a well-respected politician in Northern Ireland and a man whom I know to be of great integrity.

Every step that we have taken in this process has been in partnership with the two Executives. I make no bones about the fact that the Scotland Office has pushed the project forward from the start and has continued to do so. However, the goodwill towards the project has always been such that we have often pushed against an open door. Procedural and administrative issues have threatened the project, but the political will has always been there to find a way through, or around, those problems.

I am on record as saying that a decision to go ahead with the tendering for a new ferry service would be a leap of faith. It is truer to say that the process has been a series of calculated leaps of faith; that a company can be found to make the service successful—we have started on that; that the service will meet the needs of today's tourist and freight markets; and that the public money invested will deliver real benefits to Kintyre and Moyle. There is no totally effective way to test a market without going out and testing it. Last May, the Scotland Office formally sought initial outline expressions of interest in tendering for the ferry service. Shortly afterwards, we also commissioned independent consultants to undertake an in-depth study into the potential benefits and costs of a new service. That work was crucial in identifying the benefits that different service options might bring to the local economies and at what potential cost to the taxpayer.On that basis, we determined that it should run for 11 months a year and for five years initially, and that the subsidy should be £1 million a year.

Having sat through discussions with consultants, I am confident that the work was thorough. The difficult issue of the potential effects on expansion of the new Vestas wind turbine factory at Machrihanish was also considered. The Scotland Office has nothing to hide and copies of the final report have been placed in the Library. The study shows that a new ferry service is not a guarantee of a substantial improvement for the economies of Kintyre and Moyle. For Kintyre especially, against a backdrop of current difficulties and peripherality, the ferry represents perhaps the best calculated risk to provide the core basis for a stable economy.

The Scotland Act reserved responsibility for financial support for shipping services that did not begin and end in Scotland. The primary purpose of a new ferry service has always been to assist economic development rather than to serve merely as a transport link to speed up access between two points. On this

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basis, both the Northern Ireland Executive and the Scottish Executive have from the start undertaken that any eventual subsidy would be found from within devolved sources.

At the request of Scottish Ministers—and with the agreement of her Cabinet colleagues—my right hon. Friend the Secretary of State will shortly lay an order in Parliament to executively devolve powers to pay for shipping services between Northern Ireland and the highlands and islands, which is the next step forward.

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Prepared 13 February 2002