Executive summary

In October 2008, Transport Scotland introduced the Road Equivalent Tariff (RET) fares policy as a pilot on routes to the Outer Hebrides, Coll and Tiree (made permanent in 2012). The principle of RET is that ferry fares should be set on the basis of travelling an equivalent distance by road plus a fixed fare element aimed at cost recovery. RET was intended to reduce the cost disadvantage faced by island communities and promote the islands as places to live, work, visit, invest and conduct business.

The RET policy was rolled-out across the Clyde and Hebrides Ferry Services (CHFS) network in three further stages, as follows:

in 2012, the policy was extended to cover Colonsay, Gigha and Islay
it was then further extended to the two Arran routes and Campbeltown in 2014
finally, in October 2015, RET was rolled-out to all remaining routes, including the high-volume routes of Oban – Craignure, Wemyss Bay – Rothesay and Largs – Cumbrae

In keeping with the requirements of the Scottish Transport Appraisal Guidance (STAG), and in order to ascertain the value for money of the policy, Transport Scotland has previously commissioned evaluations of the 2008 pilot and the 2012 and 2014 roll-outs. In order to complete this evaluation series, Transport Scotland has commissioned Peter Brett Associates LLP, now part of Stantec, and ProVersa Ltd to:

evaluate the impact of the 2015 RET roll-out on the islands and peninsular communities concerned
to consider the longer-term effects of RET across the network as a whole and
establish the cost of RET to the public purse and its contribution to wider government policy objectives

This report therefore provides an evaluation of the impact of RET on the 2015 tranche of routes together with a long-term analysis of the costs and consequences of the policy for the network as a whole. The report seeks to answer the following key questions:

what was the scale of the reduction in fares?
how did this change travel behaviour?
what have been the consequences of these changes in travel behaviour?
what have the consequences been for island supply-chains?
what has been the impact on the communities affected by RET?
how much has RET cost the government?
how has RET contributed to government policy?

The responses to the above questions were informed by:

2015 RET islands / routes
- resident survey: 767 responses, although it should be noted that half of the responses came from Cumbrae, Mull and Iona
- onboard survey: 1,643 responses, of which 21% were permanent island-residents, 4% were second homeowners; and 74% were visitors and
- business survey: 75 responses, which were supplemented by 14 business in depth interviews
network-wide
- operator carryings, performance and revenue data for all routes
- desk-based socio-economic analysis
- interviews with island haulage firms to ascertain the impact of RET on island supply-chains

In adopting this reporting style, the analysis in relation to both the 2015 RET routes and the wider network analysis is reported jointly, with references made to the former where appropriate.

What was the scale of the reduction in fares?

Network-wide

In some places, residents experienced a lesser fares reduction than the headline figure suggested because they made use of multi-journey and other discounted products (including concessionary products) prior to the introduction of RET. This was particularly the case on the Firth of Clyde routes.
The scale of the reductions on short routes was also relatively small as a consequence of the ‘fixed’ (i.e. non-distance- based) element of the RET formula.
Despite the above, fares did reduce significantly on most routes across the network, with major reductions on several high-volume routes such as those to the Outer Hebrides, Ardrossan – Brodick and Oban – Craignure.
The absolute reduction in car fares was in most cases significantly larger than the corresponding reduction in passenger fares, incentivising those who travelled as foot passengers prior to the introduction of RET to take a car onboard the ferry.
Across the network, it is estimated that the average fare paid per passenger and car dropped by 34% and 40% respectively. These figures take account of all discounts and concessions.
It should be noted that, where the impact of RET on e.g. carryings, utilisation etc is assessed, this is done by comparing against a counterfactual ‘non-RET’ demand scenario, which is used to isolate the impact of the policy.

2015 RET Islands / Routes

Whilst there was a generally high (although not universal) awareness of RET fares amongst island residents on the ‘2015 routes’, fewer than 20% of visitors surveyed were aware of the policy.
Of those who were aware of RET, only around a quarter could estimate their pre-RET fare, suggesting that the scale of the fares reduction has been forgotten relatively quickly, with RET fares being the new norm.

How did this change travel behaviour?

Network-wide

RET stimulated a significant uplift in demand across the network. Whilst passenger numbers have grown across most routes, the growth in car traffic in most cases has been significantly larger, implying that some who previously travelled as foot passengers are now taking a car onboard the ferry.
The redefinition of the length at which a vehicle is classified as ‘commercial’ from 5m to 6m has also led to an increase in van and car + trailer movements, at the expense of more traditional commercial vehicle movements over 6m. These factors have inflated car carryings across the network somewhat and depressed commercial vehicle numbers. This is particularly true on shorter routes, where the ferry frequency allows a day return trip (e.g. Ardrossan - Brodick).
Overall, it is estimated that, by 2018, RET has increased network-wide passenger numbers by 11.6% and cars carried by 20.6%.

2015 RET Islands / Routes

Around 25% of island residents made more ferry trips as a result of the introduction of RET, with a further 25% making the same number of trips as before RET was introduced, but they are now taking the car onboard more often. The remaining 50% largely make the same number of journeys as prior to the introduction of RET.
For those who did not make more trips when RET was introduced, the main reasons were the widespread use of discounted multi-journey books prior to the introduction of RET (particularly on the Firth of Clyde routes) and because residents were making all the journeys they wished to make, and therefore had no need to travel more often.
The resident survey suggests that residents of the ‘2015 RET’ islands are now using the ferry more frequently as both foot passengers and car drivers. However, the responses also suggest a switch from travelling as a foot passenger to now taking a car onboard the ferry, a point which is supported by the carryings data.
The level of estimated induced demand as a result of RET on the ‘2015 RET’ routes is relatively small, some 6% in total (although it should be noted that this is a more modest increase than the carryings data would suggest).
The additional trips generated by the reduction in fares in the ‘2015 islands’ are predominantly for visiting friends & relatives, shopping, business travel and day-trips / holidays. There has also been a growth in health-related trips, which are very important from a resident welfare perspective.
RET has incentivised additional journeys by car amongst residents. This implies that the cost of taking a car was a significant barrier for many and RET has removed this in the ‘2015 RET’ islands.

What have been the consequences of these changes in travel behaviour?

Network-wide

Vessel vehicle-deck load factors have increased across almost all routes and seasons. The supply on the majority of routes is capable of accommodating this increase in demand, but there are several routes where there are significant summer capacity pressures emerging, including for example Oban-Craignure, Ardrossan-Brodick, Stornoway-Ullapool and Uig-Tarbert/Lochmaddy.
There is clear evidence of an extension of the tourism season across most islands, with shoulder summer carryings growth generally exceeding peak summer growth on most routes.

2015 RET Islands / Routes

Of the bookable ‘2015 RET’ routes, 87% of respondents to the resident survey are now finding it more difficult to make a vehicle booking, mainly in the summer period and on summer Saturdays in particular. This is having a negative impact on island residents, either adding a ‘hassle-factor’ to trips which are being made or preventing trips from being made at all.
On the evidence of the resident survey, the vehicle booking window has demonstrably moved since RET was introduced - prior to RET, people tended to book 2-3 days in advance but now typically book 2-4 weeks in advance. On higher volume non-bookable routes (e.g. Largs-Cumbrae), queues are reported at the ferry terminals on peak days which are impacting on residents’ ability to travel when they need to / wish to.
The onboard surveys suggest that island residents are not willing to pay more to travel at peak times, but visitors are.
There is also strong agreement amongst visitors and residents that: vehicle-deck space should be reserved for residents at peak times; bookings should be released in phases; and that people would switch to quieter sailings with reduced fares. There was also minority interest (circa 25% of island residents) in car-share and car-club schemes, whilst 37% of visitors expressed an interest in an island-based car hire scheme.
Island residents and, to a lesser extent visitors, have noted some deterioration in the level of service since RET was introduced on the ‘2015 routes’. This is predominantly due to delays associated with slower turnaround times as a result of the increased volumes of vehicular traffic on most routes (a point borne out by operator performance data). CalMac Ferries Ltd has proactively addressed this challenge by amending timetables where possible and increasing port turnaround time as well as recruiting port staff to accommodate growing demand. However, these pressures remain significant and the above measures only go so far in resolving the issues.
The benefits ‘2015 RET’ residents have derived from making additional trips are closely related to their journey purpose (predominantly visiting friends & relatives more often, shopping and leisure opportunities). Around a quarter of respondents make the same number of trips as prior to RET but now take a car, which has allowed them to access different destinations and widen the range of activities in which they engage whilst on the mainland.
RET has also facilitated improved access to employment, training and business opportunities for a small number of island residents, generating economic benefits for the communities concerned, which are in addition to the social benefits outlined above. The policy has also facilitated health-related travel, a key benefit of RET.
It is common in many smaller islands for residents to maintain an old on-island car (or no island car) and keep their primary car on the mainland. This reduces the need to pay a ferry car fare when making a journey. The number of island cars parked on the mainland should have reduced, but no significant impact on car ownership levels was identified, which suggests that residents of the smaller island communities are taking advantage of lower fares to take their car back to the island more often.
Due to the switch from foot passenger to car travel, a significant proportion of residents surveyed now spend more on fares than they did prior to the introduction of RET. This suggests that the perceived benefits of taking a car onboard the ferry outweigh the marginal fares costs, and that the pre-RET fares were frustrating journeys which people were wanting to make.
RET has facilitated growth in the crucial ‘visiting friends & relatives’ market, whilst also making it easier for island residents to access mainland goods and services.
Where residents have saved money as a result of RET (i.e. they are not paying additional fares through now taking a car onboard), the evidence from the resident survey suggests that the money saved on ferry fares has been recycled back into both the island and mainland economies (and is in effect a transfer from government). Some 37% noted that spending has increased in general, albeit a larger proportion of this has been spent on the mainland than on the island. From the perspective of resident spending, RET has generated a net additional economic benefit for the islands concerned.
The visitor spend data collected through the onboard survey suggest that visitors are spending fairly substantial sums of money on the islands, ranging from £114 for the average daytripper party to £387 of non-accommodation spend for parties staying more than one night.
A growth in visitor expenditure has been identified through the business survey and stakeholder interviews. However, feedback suggested that this is by no means universal and has been largely focused in food-based retail. It was also suggested that the comparatively low cost of taking a car since RET was introduced has prompted visitors to buy goods on the mainland and take them over in the car rather than travelling as a foot passenger and buying on-island.
Overall, the introduction of RET to the ‘2015 islands’ has had a differential effect in terms of exposing the islands to increased competition and economic leakage from residents buying goods or services on the Scottish mainland. The business survey and accompanying interviews have highlighted that the islands closest to the Scottish mainland and with a reasonable scale of on-island retail and service provision have been most affected (i.e. Bute, Cumbrae and Mull). Other islands which are more distant (e.g. the Small Isles) or which have always had a dependence on the mainland for retail and service provision (i.e. Lismore) have been more insulated against this effect.
Whilst around 40% of businesses noted that turnover has increased since RET was introduced in 2015, competition has also eroded turnover for around a fifth of businesses surveyed, with these businesses concentrated on islands close to the mainland. The increase in turnover has not particularly fed through to a growth in employment.
In many cases, the introduction of RET has increased the disposable income of island residents and visitors. Whilst there will be a degree of economic leakage, the policy nonetheless represents an investment in island communities, supporting both GVA and employment growth.
The new journeys generated by RET have supported an increase in Scottish visitor numbers, national productivity and labour market flexibility. These effects combine to provide a net economic benefit at the national level.
The type, volume and spatial disaggregation of data covering Scotland’s islands does not facilitate a rigorous and robust evaluation of how RET (or indeed other major policies) has impacted on the society and economy of the isles. The absence of appropriate data is in itself an important finding, particularly in the context of carrying out Island Impact Assessments. Data geography is a particular problem in this respect.
Whilst RET has offered social and economic benefits to the island communities and those who visit them, it has had a net environmental disbenefit. This is primarily as a result of increased vehicle kilometres, increased ferry sailings and, potentially, air quality impacts in ports around urban / residential areas.
Visitors and residents both highlighted their main reasons for taking a car on the ferry as needing to take luggage / equipment and the convenience of having their own vehicle. This suggests that the absolute level of fares prior to the introduction of RET acted as a deterrent to travel. Some 80% of car users noted that public transport was not an option for their onward journey, a particular issue outwith the Firth of Clyde where rail and bus services are infrequent and journey times long.
The reasons for not using public transport were similar for the mainland and island legs of the journey. The journey times, interchange times and cost of public transport are the main deterrents to its use for connecting with ferry services at either side of the crossing.
Whilst it can be argued that RET has had negative environmental implications, the journeys which are now being undertaken by car which were not before are of personal benefit to the individuals concerned, who are now making journeys which were previously frustrated by the cost of travel. The survey suggests that the scope for growing mode share in active and public transport is currently limited given long onward journey times, limited public transport coverage etc.

What have the consequences been for island supply chains?

Network-wide

With limited exceptions, the roll-out of RET has not stimulated a significant increase in freight volumes, at least amongst commercial freight providers.
On shorter, high volume routes, the ‘6m rule’ has led to a reduction in goods moved on conventional commercial vehicles. Consultation suggested that island residents now more readily move goods in their own vehicles (sometimes using a trailer), whilst haulage firms have responded by substituting HGVs for vans less than 6m in length, such is the differential between the commercial and non-commercial tariff levels. It was noted in some cases that this has led to a better level of service for customers, but at the same time has reduced revenue for haulage firms and increased the amount of ferry vehicle deck space used by freight.
Smaller population islands have noticed a tangible increase in the volume of goods being moved, which is thought to come from increased visitor numbers, and is more noticeable because the volume of background freight is lower. As these islands have always typically been served by vans, the ‘6m rule’ has actually extended fleet choice, to the benefit of the haulier and customer.
The introduction of RET has had little impact on the structure of the freight market on longer routes, primarily due to the inability to make a day-return journey to the Scottish mainland.
The increase in demand for vehicle-deck space is proving to be a significant challenge for the haulage industry. Whilst block-booking affords a degree of protection, securing space over and above this can be challenging on peak sailings on the busiest routes. Moreover, recovering from disruption and delay has become more difficult. A strong perception emerged through the haulier interviews that vehicle-related capacity constraints on the ferry are choking off growth and productive investment in the islands.

What has been the impact on the communities affected by RET?

2015 RET Islands / Routes

There is widespread agreement that RET has increased day-trip visitor numbers to the ‘2015 RET’ communities, but concern that this has led to pressures on local infrastructure, particularly roads and parking. It should be noted though that the sample in the resident survey is dominated by Mull and Cumbrae, where these issues are perhaps most acute.
The majority of residents in the ‘2015 RET’ islands feel that they have personally benefitted from RET, even where wider perceptions of how the policy has impacted on their community is less positive. This is predominantly a result of increased disposable income and the ability to make journeys which were previously prevented by fare levels. The key exception is the ‘2015 RET’ islands in the Firth of Clyde, largely due to the minimal reductions in fares for residents on these islands.
A key challenge in validating community concerns about motorhome growth in the islands is that these users are not categorised as a separate type in the carryings data and thus it is challenging to profile the change in carryings as a result of RET.
In the ‘2015 RET’ islands, more people overall think that their community is worse off as a result of RET, but this finding is strongly driven by the residents of Bute, Cumbrae, Mull & Iona, where concerns over ferry and infrastructure capacity have been widely noted. In all other island groupings, RET has been considered to be positive for communities.
Reflecting the previous point, more people think RET has made their community a less attractive place to live, but this is again driven by the Firth of Clyde islands and Mull & Iona.
Given that the primary research here was focussed on the 2015 routes, there may be value in undertaking specific analysis across the whole network covering the key questions regarding how RET has affected individuals and communities from the island resident perspective. This could be achieved through phone-based surveys.
The evidence suggests that RET has contributed to in-migration to the ‘2015 RET’ islands, boosting in-migration by around 10%.
Whilst on balance RET is considered a beneficial policy for island businesses, this view is by no means universally held, particularly on islands close to the mainland which have been impacted by competition and visitor number levels which local infrastructure is incapable of accommodating. The impact of RET on ferry capacity is a key issue for island businesses, particularly in Mull.
The consensus view amongst businesses is that RET has been a good thing for communities. Again, however, there are lower levels of satisfaction with the policy in a subset of islands, predominantly as a result of ferry-related capacity issues and the inability of local infrastructure to accommodate the increased visitor numbers.
The business survey and stakeholder interviews found that RET has prompted business investment in a small number of businesses across several islands. These investments have typically been focused on businesses in the tourism sector, which are responding to increased visitor numbers and the extension of the season. It is important to note that, as RET was only introduced to this subset of islands in 2015, the ‘investment impacts’ have not fully materialised. A number of businesses interviewed identified RET-related investments which were in the pipeline but had not yet been delivered.

How much has RET cost the Scottish Government?

It is estimated that RET is now costing the Scottish Government around £25m per annum in revenue support, of which around two thirds is attributable to RET for vehicles less than 6m in length. The 2015 roll-out more than doubled the level of revenue support required, due to this roll-out containing a larger number of routes and some of the busiest. Around two thirds of this sum is supporting reductions in car fares, with the remainder largely supporting reductions in passenger fares (as the cost of reduced coach fares is minimal).
Since RET was first introduced in 2008, it has cost the Scottish Government a cumulative £120m (to 2018) in reduced fares revenue. As previously noted, the expansion of RET to the 2015 islands has significantly ramped-up the annual funding requirement, such that around £100m of revenue support will be required every four years to maintain RET fares at their current level (compared to their previous non-RET level).
Out with the additional revenue cost of RET, the increase in demand in island communities has created other cost pressures, which in many cases organisations are struggling to address or are diverting money from other sources to mitigate RET impacts. These have included:
- The increase in visitors to the islands and the increased propensity for both residents and visitors to take their car on the ferry has caused capacity challenges on several routes across the network. This has created challenges for the operator in terms of managing demand, maintaining punctuality and, at various ports, safely and efficiently managing traffic. Vessels’ operating days are also longer with fewer lay-up days than previously scheduled. This is putting added wear on already ageing assets which is impacting on the technical reliability of the service.
- A further impact of the increase in vehicle movements is pressure on local road networks. This is particularly pertinent in ‘honeypot’ islands such as Mull and Harris, which are dominated by single track roads. The maintenance burden has increased, particularly in relation to verge damage associated with e.g. motorhomes. Traffic management and parking in and around ferry terminals is also proving to be challenging at various locations and is requiring investment to keep pace with demand.
- There is a consistent story emerging across the local authorities about island infrastructure being insufficient to meet the increased demands placed on it. As well as roads and parking, this includes public toilet provision, general and chemical waste facilities, accommodation and campsite provision.
- There is anecdotal evidence to suggest that patronage on local authority subsidised bus services has declined as a result of more residents and visitors taking their car on the ferry. However, there is no quantitative evidence available to support this point.

Conclusion: How has RET contributed to Government policy?

RET was ultimately introduced to contribute towards the transport and wider social and economic policies of the Scottish Government. In this respect, its success can be measured in terms of how it has contributed towards its original investment objectives, which were to:

increase demand for ferry services by making ferry travel more affordable and accessible
increase tourism and supporting existing tourism markets
enhance local economies and the wider national economy

The RET policy overall has largely delivered these objectives, as is highlighted in the table below, which adopts a seven-point scale as follows:

- highly positive contribution

- moderate positive contribution

- slightly positive contribution

– no impact

- slightly negative contribution

- moderate negative contribution

- highly negative contribution

Table S1: Contribution of RET to original objectives


RET objective	Assessment	Comment
Increase demand for ferry services by making ferry travel more affordable and more accessible.	highly positive contribution	Demand has increased across almost all routes on the network, with a significantly larger number of island residents and visitors using the CHFS ferries than prior to the introduction of RET.
Increase tourism and supporting existing tourism markets.	moderate positive contribution	The observed increase in ferry carryings and survey programmes undertaken in this and previous RET evaluations clearly highlight the growth in the tourism market. There is also clear evidence of an extension of the tourist season. Note however that definitive, island level tourism statistics are not available, and this means that accurate quantification of this impact is not possible.
Enhance local economies and the wider national economy.	moderate positive contribution	RET has made a positive overall contribution to local economies and the wider economy – it has facilitated: improved access to employment, training and business opportunities additional leisure travel (providing social benefits) increased expenditure – 37% in resident survey noted that spending had increased in general since RET was introduced growth in visitor numbers, expenditure and the length of the season It is though important to note that these benefits are set against an annual spend of £25m on the policy, and satisfaction is not universal. Again, the lack of island-level statistics means we cannot accurately quantify this impact.

The wider government policy context is also evolving at present, with a range of new strategy documents emerging to guide transport, economic and islands development in the medium-term. Whilst RET cannot be evaluated against these new strategies as it predates them, there is benefit in ‘stress-testing’ the policy outcomes against the emerging policy context – this has been done through assessing how RET has contributed towards the headline government policies for:

transport, as expressed through the National Transport Strategy 2
the economy, as expressed through Scotland’s Economic Strategy
islands, as expressed through the National Islands Plan
Scotland as a whole, as expressed through the National Performance Framework, which records how all areas of government are contributing towards the Government’s Purpose of ‘creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth’

Overall, RET continues to provide a strong fit with the emerging policy context, and in particular objectives related to economic development, social inclusion and inclusive growth.

Whilst there are elements of dissatisfaction with the policy – most notably ferry capacity and reliability, and the impact on island infrastructure – there is broad consensus that RET has been a good thing for the islands. It is though only fair to note that this sentiment is not universal and there are particular islands where there is significant dissatisfaction with elements of the policy.

In any future review of the RET policy, the research suggests that the following issues should be considered:
Two key issues emerged from this evaluation from the perspective of island residents:
- They cannot always travel when they want to travel by car / vehicle: the research suggested an appetite for a range of demand management related measures which should be further explored.
- Island infrastructure / communities are being overwhelmed: There are perhaps two approaches to addressing this issue – (1) implementing measures to reduce visitor numbers / car-based visitor numbers; or (2) investing in tourism infrastructure (e.g. roads, parking, visitor amenities) and ‘greening’ it where possible. As businesses have made investments to the benefit of the islands’ economy in response to the increased visitor numbers, the first option would be challenging and therefore a better question could be over how infrastructure improvements could best be delivered in the affected communities.
From the perspective of the Scottish Government, RET has induced a circa 20% growth in car travel by ferry on the CHFS network. As well as putting cost and resilience pressure on the assets, it is leading to network-wide demands for investment in additional services, tonnage and infrastructure. Unless there is a policy decision to reverse at least some of the fares reductions introduced since 2008, there is a strategic choice between ‘predict and provide’ - which would be contrary to the National Transport Strategy and present substantial capital and ongoing operating costs - or implementing a more balanced approach of additional capacity and demand management measures (of which fares would be a part), which would represent a departure from the current RET policy.

In order to aid transparency and understanding, the objectives of any fares review should reflect the findings of this, and previous RET evaluations, which could be captured in revised / new Transport Planning Objectives, reflecting the greater understanding of the scope and scale of impacts of the current fares policy.

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