Northlink Ferrt Stromness (F Grahame)

The review of the  next contracts for the Northern Isles ferries and the Gourock-Dunoon services is to be extended to take into account the effect of EU state aid rules.

 The additional work will focus on whether the direct award of a contract would comply with the complex regulations governing state aid, whilst also satisfying the so called “Teckal exemption”.

The Teckal exemption

The Teckal exemption (also known as the “in-house” exemption) developed through EU case law to provide that contracting authorities may award a contract to an economic entity (i.e. the supplier), without recourse to a regulated procurement procedure, when:

• the contracting authority exercises control over that economic entity that is similar to that which it exercises over its own departments (known as the “control test”); and
• the economic entity carries out the essential part of its activities with the contracting authority (known as the “function test”). (Lexology)

Minister for Transport and the Islands in the Scottish Government  Humza Yousaf said:

“Since the policy review was launched in February, my officials have carried out extensive engagement with the European Commission and key stakeholders across our ferry networks.”

“This work has led to the conclusion that a direct award to a body that is compliant with the Teckal exemption would be allowed under EU legislation. However, before we can consider making a direct award, we also need to make sure it would comply with complex state aid rules.”

“This will require further engagement with the Commission and will almost certainly extend the timeline for the policy review beyond the autumn period. We will publish a report on progress to date in the autumn and aim to complete the full review process as soon as possible.”

 “It is the Scottish Government’s preference to make a direct award to an in-house provider, but it’s important that the outcome of this review is not prejudged.”

The cost of the ferries to the Northern Isles has been a major issue at UK and Scottish General Elections in the islands. The  SNP candidate for Shetland in the 2016 election the late Danus Skene got into a furious debate with the LibDems Tavish Scott who continually criticises the Scottish Government over the cost of ferry fares. Tavish Scott was the transport minister when the Northlink contract for our new boats was awarded in 2005 on a PFI style deal.

Danus Skene explained:

“We [Shetland] receive much more subsidy per journey than anyone on the west coast, but it is all being spent on the grossly inefficient contract negotiated by the Labour/Lib Dem coalition. For example, the present inappropriate ferries costing £100m will cost over £200m over 20 years because of the terms of the financial leasing arrangement with the Royal Bank.”

“The effective subsidy of a passenger between Lerwick and Aberdeen provided by the taxpayer is in the region of £300. This is way above the support given on the west coast, however comparisons are made.”

The Scottish Government have pledged to reduce ferry fares in the Northern Isles but the RET system operated in the Western Isles would not suit Shetland or the Kirkwall to Aberdeen route as it would increase the price.

Humza Yousaf said:

Northlink Ferry (F Grahame)

“Our ferry services are iconic transport links that play a vital role for our island economies. Making sure they continue to support the communities they serve, as well as delivering best value for taxpayer’s money, will always remain at the heart of our ferry operations.”

The policy review was originally planned to finish in the autumn, but will now likely go beyond that period.

Reporter: Fiona Grahame