Impact of the Removal of RET Fares from Commercial Vehicles on The Western Isles, Coll and Tiree

2 Ferry Fares for CV Operators

2.1 Introduction

2.1.1 Since 2007, ferry fares for commercial vehicles have undergone a number of changes ie pre‑RET levels prior to October 2008, through RET which ran from October 2008 until the end of March 2012, and during the transitional arrangements which were introduced on 1 April 2012. This chapter provides a factual record of the fare changes over this period for a range of different vehicle sizes and routes. This is helpful to provide background and context before moving on to the analysis and discussion of the impacts in later chapters.

2.2 Background

2.2.1 Commercial vehicle operators travelling on the ferry routes between the Western Isles, Coll and Tiree and the Scottish mainland have witnessed a number of different fare regimes in recent years. The Table below summarises the various fare systems that have prevailed since 2007 and that are anticipated to be in place by 2014/15. While the final row in the Table shows a move to Post-RET fares, the precise structure of future fares for commercial vehicles, and the timing, have yet to be finalised and will be informed by the findings of this study.

Table 2.1 Summary of Fare Systems 2008-2015

Table 2.1 Summary of Fare Systems 2008-2015

2.2.2 Prior to the introduction of the RET pilot, fares for commercial vehicles on routes to the Western Isles, Coll and Tiree, similar to other routes on the Clyde and Hebrides ferry network, were set on a route-specific basis. In addition, there were a small number of concessions available to hauliers depending on factors such as the number of journeys and level of turnover on a particular route.

2.2.3 The RET pilot was introduced in October 2008 and ran to the end of March 2012. During this period a single structure was applied across all routes, with the fare comprising a fixed element plus a charge per ½ metre[1] of the vehicle length.

2.2.4 Following the removal of RET fares for CVs in April 2012, the policy of the Scottish Government was to return to pre-RET fares for CVs. The proposed rates were to be based on the 2008 rate per ½ metre uplifted for inflationary increases during the period of the pilot. It was clear that the return to non-RET CV fares would involve large fare increases. Transitional arrangements were therefore introduced which were designed to cushion, in any given year, the impact of the move to non-RET levels.

2.2.5 Following the early findings of this study the proposed transitional arrangements for 2013 for commercial fares were limited to a 10% increase across all routes. The final findings of this study will help inform the longer-term fares policy from 2014 onwards.

2.2.6 The key comparisons made in this chapter are to compare:

  • the pre-RET fares (peach shaded box) with the RET fares (green shaded boxes) - this will establish how the introduction of RET reduced the published fares for CVs; and
  • the RET fares (green shaded boxes) with the transitional fares (blue shaded boxes) - this will set out how fares have increased as a result of the removal of RET.

2.2.7 While this chapter will not analyse in detail the impact of the move to post-RET fares (as it is not currently known what these fares will be and will be influenced by the findings of this study), Chapters 6 to 9 consider the impacts of the removal of RET and Chapter 10 discusses the pros and cons of alternative fares systems which could be implemented to replace RET.

2.2.8 The routes considered under the different fares structures are those that were included in the RET pilot. These are:

  • Oban - Coll / Tiree;
  • Coll - Tiree;
  • Oban - Castlebay / Lochboisdale;
  • Uig - Tarbert;
  • Uig - Lochmaddy; and
  • Ullapool - Stornoway.

2.2.9 It should be noted that the CV fares for the Uig - Tarbert and Uig - Lochmaddy routes are the same. This has been the case under all fares structures and the two routes are therefore considered as a single route for the purpose of this study.

2.3 Pre-RET Fares

2.3.1 Prior to the introduction of RET, the CV fare on a particular route was the product of the length of the vehicle and the rate per half metre. The rate per half metre is broadly based on the length of each crossing, with the longer crossings typically having a higher rate per half metre, as is illustrated in the Table below where the rate per half metre is the highest on the Oban - Castlebay / Lochboisdale route which is the longest.

Table 2.2 Pre-RET Half-Metre Rates by Route
Route Rate per ½ metre
Oban - Coll / Tiree £10.48
Coll - Tiree £3.99
Oban - Castlebay / Lochboisdale £14.03
Uig - Tarbert, / Lochmaddy £7.88
Ullapool - Stornoway £11.16

2.3.2 Table 2.3 below presents the fares for a sample of CV lengths, namely seven metres, 12 metres and 17 metres[2]. All fares included in the Table and throughout this chapter are for a single journey and exclude VAT.

Table 2.3 Pre-RET Commercial Vehicle Fares
Route 7m 12m 17m
Oban - Coll / Tiree £147 £252 £356
Coll - Tiree £56 £96 £136
Oban - Castlebay / Lochboisdale £196 £337 £477
Uig - Tarbert, / Lochmaddy £110 £189 £268
Ullapool - Stornoway £156 £268 £379

2.3.3 Table 2.3 shows that the highest fares were on the Oban - Castlebay / Lochboisdale route, with the lowest fares on the sailing between Coll and Tiree, reflecting the ½ metre rate per route and therefore the length of the crossing. On sailings between the mainland and the islands, the lowest fare was on the Uig - Tarbert / Lochmaddy route.

2.4 Pre-RET Discounts

2.4.1 There is an important caveat to Table 2.3 - the Table shows the published fares that commercial operators would have paid. However, a small number of discounts were available to users in the pre-RET era.

2.4.2 The key discount in this respect was the Traders' Rebate Scheme (TRS). The scheme offered all commercial vehicle operators a rebate based on their volume of carryings on a particular route on the Clyde and Hebrides Ferry network. The rebate was calculated on the basis of a 'Numeral', which related to annual turnover / expenditure of the haulage firm and the number of journeys undertaken on the ferry. The formula used to calculate the level of discount was:

Numeral = [(Turnover / 1000) / Rate per half metre] x no. of journeys

Where:

  • Turnover = total customer (ie the haulier) fares expenditure on a specific route during the qualified period;
  • Rate = published ½ metre rate for commercial vehicles on a specific route; and
  • Journeys = number of journeys by operator on a specific route during qualifying period.

2.4.3 Depending on the 'numeral' calculated, an operator qualified for a discount of between 0% and 15% on a given route, for a specific twelve month period. Table 2.4 below sets out the fares assuming a 15% discount. Note that the non-discounted fare is shown in brackets, italics and red.

Table 2.4 Pre-RET Commercial Vehicle Fares with a 15% TRS Discount
Route 7m 12m 17m
Oban - Coll / Tiree £125 (£147) £214 (£252) £303 (£356)
Coll - Tiree £48 (£56) £82 (£96) £116 (£136)
Oban - Castlebay / Lochboisdale £167 (£196) £286 (£337) £405 (£477)
Uig - Tarbert, / Lochmaddy £94 (£110) £161 (£189) £228 (£268)
Ullapool - Stornoway £133 (£156) £228 (£268) £322 (£379)

2.4.4 It can be seen from Table 2.4 that some of the TRS related discounts were quite substantial in absolute terms. For example, a 15% TRS discount made it £72 cheaper to take a 17 metre CV onto the Oban - Castlebay / Lochboisdale ferry. Indeed, even on the lowest cost crossing ie Tarbert / Lochmaddy - Uig, there was a £16 reduction on a seven metre CV and a £40 reduction on a 17 metre CV.

Who benefitted from TRS?

2.4.5 The evidence provided by the current ferry operator, CalMac, shows that, in the year prior to the introduction of RET, there were a total of 12 hauliers receiving 14 discounts across the RET pilot routes. The number of hauliers receiving discounts on routes to the mainland was:

Table 2.5 Number of TRS Operator Rebates
Route Operator Rebates
Oban - Coll / Tiree Two
Oban - Castlebay / Lochboisdale One
Uig - Tarbert, / Lochmaddy Six
Ullapool - Stornoway Five

2.4.6 In terms of the level of discount, there were five discounts of 15% (three different operators across two routes, with two operators receiving it on both routes); two operators received 12.5%; three operators received 10%; two operators received discounts of 5%; and two operators received 2.5%.

2.4.7 The evidence provided by CalMac suggests that, on routes included in the RET pilot, twelve island hauliers received a discount, with only three firms in receipt of the maximum discount of 15%. However, while the absolute number of operators was small, their number of journeys accounted for a large proportion of total commercial vehicle journeys in any given year. It is difficult to be precise given the available data[3], but the operators receiving the discount accounted for between 40% to 50% of CV carryings on the Uig - Tarbert / Lochmaddy, Oban - Castlebay / Lochboisdale and Oban - Coll / Tiree routes in the year prior to the RET pilot being introduced. On the Ullapool - Stornoway route the figure was even higher at around 70%.

2.4.8 It can be concluded from the data that the majority of established island haulage firms had at least some form of TRS discount and were therefore not paying the full fare. The traffic that did not benefit from a TRS discount was typically either mainland based or infrequent suppliers to / from the islands.

2.5 RET Pilot

2.5.1 The aim of the RET pilot was to address evidence-based concerns that businesses on the Western Isles, Coll and Tiree were being disadvantaged by their peripheral island locations ie the main objective for the public support and intervention was on equity grounds. In theory, to remove the island-based disadvantage, the fares were set so that the cost of transporting goods by ferry was equivalent to carrying the same goods the same distance by road, taking account of factors such as fuel, insurance, depreciation, engine size and maintenance costs. In reality, the need for cost recovery necessitated the addition of a 'boarding fare' to the road equivalent fare.

2.5.2 The RET fares on the routes consisted of this boarding fare of £20 plus a rate per ½ metre per mile, the latter taking account of the length of the route. The rates per half metre on the routes in 2008 were:

Table 2.6 RET Rates per Half Metre 2008
Route Rate per ½ metre
Oban - Coll / Tiree £5.37
Coll - Tiree £1.08
Oban - Castlebay / Lochboisdale £8.01
Uig - Tarbert, / Lochmaddy £2.61
Ullapool - Stornoway £4.68

2.5.3 Using these fixed and variable rates the initial fares in the RET pilot for commercial vehicles of seven metres, 12 metres and 17 metres in length are set out in Table 2.7.

Table 2.7 RET Fares October 2008
Route 7m 12m 17m
Oban - Coll / Tiree £95 £149 £203
Coll - Tiree £35 £46 £57
Oban - Castlebay / Lochboisdale £132 £212 £292
Uig - Tarbert, / Lochmaddy £57 £83 £109
Ullapool - Stornoway £86 £132 £179

2.5.4 Comparing the figures in Table 2.7 with those in Table 2.3 for the pre-RET fares for commercial vehicles reveals large reductions in the published fare across vehicle length and route. The Figures in Table 2.8 below show that the change in CV fares, once RET was introduced, ranged from a reduction of 33% for a 7m vehicle on the Oban - Castlebay / Lochboisdale route, to a reduction of just under 60% for a 17m vehicle on the routes between Uig and Lochmaddy and Tarbert.

Table 2.8 Changes in Pre-RET and RET fares
Route 7m 12m 17m
Oban - Coll / Tiree -35% -41% -43%
Coll - Tiree -37% -52% -58%
Oban - Castlebay / Lochboisdale -33% -37% -39%
Uig - Tarbert, / Lochmaddy -49% -56% -59%
Ullapool - Stornoway -45% -51% -53%

2.5.5 While Table 2.8 shows the percentage reduction in full fares per route and vehicle length, it is clear from the information on the Traders' Rebate Scheme that many of the operators transporting goods to and from the islands were not paying the full pre-RET fare. A large proportion of the journeys being made were by operators who were receiving rebates of up to 15%, although those receiving the maximum discounts tended to be confined to the Uig - Tarbert / Lochmaddy and Ullapool - Stornoway routes. Taking account of the 15% rebate on these routes, as well as the 10% rebate offered to the main operator on the Oban - Castlebay / Lochboisdale route, the introduction of the RET pilot resulted in the changes in fares set out in Table 2.9.

Table 2.9 Changes in pre-RET and RET fares including TRS discount
Route 7m 12m 17m
Oban - Castlebay / Lochboisdale -25% -30% -32%
Uig - Tarbert, / Lochmaddy -40% -49% -52%
Ullapool - Stornoway -36% -42% -44%

2.5.6 The Figures in Table 2.9 continue to reveal large reductions in fares on the three routes, even where the fare prior to the introduction of RET included TRS discounts. The Table shows that the fare reductions, after taking account of TRS, ranged from 25% for a 7m vehicle on the Oban - Castlebay / Lochboisdale route to 52% on the Uig - Tarbert / Lochmaddy route.

2.5.7 Under the RET pilot the fixed and variable elements of the fare increased slightly, and in the final year for RET CV fares the core fare was £21.30 and the variable element per ½ metre for each route was:

Table 2.10 RET Rates per ½ Metre 2011
Route Rate per ½ metre
Oban - Coll / Tiree £5.74
Coll - Tiree £1.16
Oban - Castlebay / Lochboisdale £8.55
Uig - Tarbert, / Lochmaddy £2.79
Ullapool - Stornoway £4.99

2.5.8 Applying these rates resulted in 2011 fares for CVs per route of:

Table 2.11 RET Fares 2011
Route 7m 12m 17m
Oban - Coll / Tiree £102 £159 £216
Coll - Tiree £38 £49 £61
Oban - Castlebay / Lochboisdale £141 £227 £312
Uig - Tarbert, / Lochmaddy £60 £88 £116
Ullapool - Stornoway £91 £141 £191

Ullapool - Stornoway Freight vessel discount

2.5.9 During the early consultation with hauliers and businesses on and serving the islands, it was noted that a number of hauliers were receiving the 10% discount available to operators using the dedicated overnight freight vessel on the Stornoway - Ullapool route (ie the MV Muirneag). It was suggested that this discount should also be taken into account when comparing the pre-RET and RET CV fares. While it is recognised that the 10% discount was available to operators, it has not been included in the calculations. This is because the discount continued to be available at the rate of 10%, during the RET pilot. Indeed, it continues to be available to operators as part of the transitional arrangements discussed below. It has therefore had no impact on the level of reduction or increase in fares during the different periods and has been excluded from the calculations.

2.6 Post-RET Fares

2.6.1 In February 2012, the Scottish Government announced the removal of RET ferry fares for commercial vehicles, effective as of 1 April 2012. However, at the same time, it was recognised by the Scottish Government that an immediate progression to inflation-uplifted pre-RET rates would involve large sudden increases in fares. Ministers therefore introduced a three year transitional fares arrangement designed to ease the progression back to full non-RET fares. Under the transitional arrangements, each year the new fare would be the mid-point between the current fare and the non-RET fare, with the Scottish Government funding the difference. Additionally, a cap was put in place so that no fare would rise by more than 50% in any one year.

2.6.2 In addition to the transitional fares scheme, the Scottish Government redefined the threshold at which a vehicle is considered to be a commercial vehicle. Under the pre-RET arrangement and during RET itself, all vehicles over 5m in length were designated as CVs. Under the new arrangements however this threshold increased to six metres. This means that some vans which previously were charged at the commercial vehicle rate, ie those between 5m and 6m, are now charged at the car rate.

Transitional Fares Scheme

2.6.3 Under the transitional fares scheme the rates per ½ metre that were applied in April 2012 are set out in Table 2.12. The new rate ranged from £4.70 per ½ metre on the Coll - Tiree route to £16.53 on the Oban - Castlebay / Lochboisdale route.

Table 2.12 Post-RET ½ metre rates April 2012
Route Rate per ½ metre
Oban - Coll / Tiree £12.36
Coll - Tiree £4.70
Oban - Castlebay / Lochboisdale £16.53
Uig - Tarbert, / Lochmaddy £9.30
Ullapool - Stornoway £13.15

2.6.4 Using these ½ metre rates, the transitional fares introduced in April 2012 are set out in Table 2.13. However, on certain routes, where the percentage increase in the transitional fare compared with the current fare is greater than 50%, the fare increase is capped at 50%. The routes and vehicle lengths where this is the case are shaded pink in Table 2.13 below.

Table 2.13 CV Fares 2012 Transitional Arrangements
Route 7m 12m 17m
Oban - Coll / Tiree £130 £222 £315
Coll - Tiree £49 £74 £91
Oban - Castlebay / Lochboisdale £162 £278 £393
Uig - Tarbert / Lochmaddy £91 £132 £174
Ullapool - Stornoway £137 £212 £286

2.6.5 Table 2.14 shows the percentage increase between the 2011 RET CV fare and the 2012 transitional fare. The pink shaded boxes show lower increases than would have taken place without the transitional arrangements ie fare increases were capped at 50%.

Table 2.14 CV Fare Increases Between 2011 (RET fare) and April 2012 (Transitional Arrangements)
Route 7m 12m 17m
Oban - Coll / Tiree 28% 40% 46%
Coll - Tiree 31% 43% 50%
Oban - Castlebay / Lochboisdale 15% 23% 26%
Uig - Tarbert, / Lochmaddy 50% 50% 50%
Ullapool - Stornoway 50% 50% 50%

2.6.6 The fares and the associated percentage increases set out in Tables 2.13 and 2.14 are for 2012 and represent the first stage of the transitional arrangements[4].

2.6.7 In December 2012 Scottish Government Ministers announced that fares across all routes would be limited to a 10% in April 2013, with future year rises to be considered in light of the findings of this study. The new fares for 2013 are set out in Table 2.15 below.

Table 2.15 CV Fares 2013 Transitional Arrangements
Route 7m 12m 17m
Oban - Coll / Tiree £143 £244 £347
Coll - Tiree £54 £81 £100
Oban - Castlebay / Lochboisdale £178 £306 £432
Uig - Tarbert / Lochmaddy £100 £145 £191
Ullapool - Stornoway £151 £233 £315

Comparison of 2007 and 2012 Fares

2.6.8 Table 2.16 below shows the fares on the routes pre RET and during the transitional arrangements in 2012. The table shows that on all routes and for all vehicle lengths the fares during the transitional arrangements in 2012 were lower than they were in 2007.

2.6.9 It should be noted however that many of the hauliers received a discount under TRS. Table 2.17 therefore presents a comparison of the pre RET fares assuming the full 15% discount on the Ullapool - Stornoway and the Uig / Tarbert / Lochmaddy routes and 10% on the other routes ie the maximum discount on all the routes in 2008. The figures in Table 2.17 present a mixed picture. A number of fares under the 2012 transitional arrangements are still lower than those in 2007 with a TRS discount, while others are higher.

2.6.10 It should also be noted however that the figures in Tables 2.16 and 2.17 are in prices of the day and take no account of inflation between 2007 and 2012. Almost all routes on the Clyde and Hebrides ferry network operated by CalMac have seen annual fare increases at least in line with inflation over this period. Table 2.18 presents the figures in 2012 prices and shows that all fares except one (7m vehicle on the Ullapool - Stornoway route), after taking account of the maximum TRS discount awarded in 2008 on each route, were lower under the 2012 transitional arrangements than they were in 2007.

2.6.11 Taking account of the 10% increase in CV fares that will be introduced in 2013 would mean that some fares would be slightly higher than they were in 2007, such as Oban - Coll / Tiree, while others would still be lower eg longer vehicles on the Uig - Tarbert / Lochmaddy and Ullapool - Stornoway routes.

Table 2.16 CV Fares Pre RET and 2012 Transitional Arrangements
2007 2012
Route 7m 12m 17m 7m 12m 17m
Oban - Coll / Tiree £147 £252 £356 £143 £244 £347
Coll - Tiree £56 £96 £136 £54 £81 £100
Oban - Castlebay / Lochboisdale £196 £337 £477 £178 £306 £432
Uig - Tarbert / Lochmaddy £110 £189 £268 £100 £145 £191
Ullapool - Stornoway £156 £268 £379 £151 £233 £315

Table 2.17 CV Fares Pre RET (with 15% and 10% TRS discounts) and 2012 Transitional Arrangements
2007 2012
Route 7m 12m 17m 7m 12m 17m
Oban - Coll / Tiree £132 £227 £320 £143 £244 £347
Coll - Tiree £50 £86 £122 £54 £81 £100
Oban - Castlebay / Lochboisdale £176 £303 £429 £178 £306 £432
Uig - Tarbert / Lochmaddy £94 £161 £228 £100 £145 £191
Ullapool - Stornoway £133 £228 £322 £151 £233 £315

Table 2.18 CV Fares Pre RET (with 15% and 10% TRS discounts) and 2012 Transitional Arrangements in 2012 prices
2007 2012
Route 7m 12m 17m 7m 12m 17m
Oban - Coll / Tiree £145 £252 £356 £143 £244 £347
Coll - Tiree £56 £96 £136 £54 £81 £100
Oban - Castlebay / Lochboisdale £196 £337 £477 £178 £306 £432
Uig - Tarbert / Lochmaddy £104 £179 £253 £100 £145 £191
Ullapool - Stornoway £148 £253 £358 £151 £233 £315

Post-RET Discounts

2.6.12 It should be noted that vivier trailers (which move live shellfish) and lorries carrying hay and livestock only pay for the outbound leg of the journey plus any port related charges levied by the port authority on the return leg. The CV fare for the return leg is waived and paid for by the Scottish Government. The reason for waiving the fare is that these trailers are specially adapted to carry such loads and therefore have little prospect of returning with alternative cargo.

2.7 CV Carryings

2.7.1 Table 2.19 below sets out the CV carryings (lane metres) by route since 2007 covering the various fares structures. The purpose of the figures is to compare the number of CV carryings under each fares system. It should be noted however that carryings data from April 2012 are not available for the whole year. The analysis has therefore used carryings data for the six month period April to September 2012 inclusive. To provide a like-for-like comparison, data for the same six-month period has therefore been used for previous years.

Table 2.19 CV Carryings by Route April to September, 2007 to 2012
2007 2008 2009 2010 2011 2012
Oban - Coll / Tiree 10,617 8,648 10,618 9,240 11,443 9,452
Oban - Castlebay / Lochboisdale 6,467 5,865 7,448 8,002 7,325 7,470
Uig - Tarbert, / Lochmaddy 41,558 41,354 39,237 44,367 46,072 42,776
Ullapool - Stornoway 80,068 85,300 86,791 90,886 103,545 85,318
Total 140,717 143,175 146,103 154,505 170,396 147,028

2.7.2 The figures in Table 2.19 show a similar trend in CV carryings across the four routes. While there were fluctuations during the RET pilot, carryings on all routes were higher towards the end of the pilot than at the beginning. In addition, other than the Oban - Castlebay / Lochboisdale route carryings were lower in the six months following the removal of RET than during the same six‑month period the previous year. On the Ullapool - Stornoway route, for example, carryings rose over the RET pilot period by 21% and subsequently declined by a slightly smaller proportion (18%) in the six-month period directly following the removal of RET in April 2012, albeit by the same number in absolute terms. Some of this can be explained however by the drop in activity associated with the school building programme which tailed off in 2011, rather than a wholly direct consequence of RET.

2.7.3 Similarly, on the Oban - Coll / Tiree and the Uig - Tarbert / Lochmaddy routes carryings were higher towards the end of the RET pilot than at the beginning (by 32% and 11% respectively) and have seen declines in the six-month period since its removal in April 2012 (by 17% and 7% respectively). On the Oban - Castlebay / Lochboisdale route carryings increased by 25% between Apr - Sept 2008 and Apr - Sept 2011. However, carryings have continued to increase, albeit marginally, since RET was removed.

2.7.4 For all of the routes combined, the table also shows that on a year-on-year basis carryings in the Apr-Sept period increased each year between 2007 and 2011 (overall by 29,679 or 21%) and then declined in 2012 (by 23,368 or 14%).

2.7.5 It should be noted that Table 2.19 shows only one six-month period following the removal of RET. This may not necessarily be representative of the long-term picture as the behaviour of users may change over time in response to the fares increases eg contracts may be renewed over time or demand from businesses may decline if higher fares result in higher transport charges. On the other hand, there could be local factors other than RET that may have influenced the decline in 2012, such as the end of the school building programme, which will have impacted on the Ullapool‑Stornoway figures, or the continued economic slowdown more generally. Further monitoring of carrying data will be required to fully understand the long‑term impact.

2.8 Conclusions

2.8.1 The introduction of RET fares in October 2008 saw significant reductions in fares across the routes. This ranged from around 40% for a 7m vehicle, to over 50% for the longer vehicles on most of the routes.

2.8.2 Many of the operators were in receipt of the discount from the Traders Rebate Scheme. This meant that the fare reductions were less than announced. Nevertheless, the fare reductions were still significant.

2.8.3 The removal of RET in March 2012 resulted in significant fare increases, although these were limited to 50% in any given year.

2.8.4 Following the removal of RET, carryings between April and September 2012, compared to the same six-month period in 2011 declined on all routes other than Oban - Castlebay / Lochboisdale. Carryings fell be up to 17.5% on the Oban - Coll / Tiree and the Uig - Tarbert / Lochmaddy routes.

2.8.5 The reduction in carryings is more likely to be due to the removal of RET than the continued subdued economic activity, as the CV carryings across the rest of the Clyde and Hebrides network as a whole, and on the majority of individual routes, increased over the same period.