Europe rules CalMac subsidy for lifeline routes is within law

Published on Wednesday 28 October 2009 21:19

THE funding of Scotland's lifeline ferry services has not breached European law, an investigation has found.

The European Commission launched an inquiry last year into government subsidy of Caledonian MacBrayne's ferry routes, including Gourock to Dunoon, and Northlink's services to Orkney and Shetland.

It followed complaints that state aid to the publicly-owned companies was unfair and anti-competitive.

But the EC said yesterday the public financing is compatible with state aid rules. However, it called for the Gourock-Dunoon ferry to be put out to public tender.

It means the government will not face a fine and not be forced to break up and seek new tenders for other ferry links.

The ruling states: "The public service obligations for the western and northern islands were legitimately defined and entrusted on the operators.

"The commission also came to the conclusion that the compensation paid to the operators in the past did not exceed the costs of providing the public service entrusted on them.

"Lastly, it did not find sufficient evidence that these operators had engaged in any type of anti-competitive behaviour that might have unduly distorted competition."

It added: "The commission will continue to closely monitor the public financing of the Scottish ferry transport system in order to avoid any undue distortion of competition."

Clyde and Hebridean routes are offered as a package of 24, with the exception of Gourock-Dunoon where Western Ferries runs a rival service.

The government said this is the best way to prevent private operators "cherry-picking" the most profitable routes, safeguarding the future of lifeline services that need subsidies to survive.

A Scottish Government spokesman said: "This report allows us to maintain the support which ferries receive at present while also allowing us to look at what further improvements can be made to these lifeline services as part of our ferries review."

SNP MEP Alyn Smith, who has campaigned to secure the island ferry services, said: "After decades of jumping through EU legal hoops, this is a positive decision for Scotland's remote and island communities.

"Our ferry services are essential and I welcome the commission's confirmation that the Scottish Government's actions are right and appropriate to secure the future of our ferries."

Mr Smith said that confirmation from the EU that a town-centre to town-centre service between Gourock and Dunoon can continue is good news – though there is still a need for a tendering process.

George Lyon, the Liberal Democrat MEP, said he welcomed the "clean bill of health" given to the tendering process undertaken by the previous Scottish Executive.