2 Current Practice - Commercial Vehicles
2.1.1 This chapter sets out the findings of Transport Scotland's benchmarking analysis of fares for commercial vehicle freight.
2.1.2 In the context of this research, commercial vehicles are defined as self-propelled vehicles used for the transportation of commercial goods. Commercial vehicles therefore comprise: vans and rigids (lorries) as well as trailers attached to a cab / tractor unit (e.g. articulated lorries). A large commercial vehicle is defined as a commercial vehicle over 5 metres in length.
2.1.3 The full paper prepared by Transport Scotland is provided as an addendum to this report and is available on the Transport Scotland website.
2.2 Commercial Vehicles - Key Issues
2.2.1 The following sections set out the approach to charging for commercial vehicles.
2.2.2 There are similarities in the charging mechanisms used for CVs across the network as, for the most part; fares are set on the basis of vehicle length and route length. Vehicle length is a key determinant of CV fares in CalMac, Serco NorthLink and all Council services except Highland Council.
2.2.3 CalMac and Serco NorthLink charge rates per metre (Serco NorthLink) or half metre (CalMac) which increase with route length. Argyll & Bute Council and Shetland Islands Council both charge fares for different bandings of vehicle length. However, whereas Argyll & Bute Council's fares differ by route, Shetland Islands Council's CV fares do not, so that a CV of a particular length travelling on any Shetland Islands Council route will be charged the same fare. This flat fares structure is not seen on any other part of the network.
2.2.4 Highland Council, on the Corran Ferry, is the only operator which charges by vehicle weight and composition (number of axles). The fares charged for CVs carried on the Cromarty-Nigg service, funded by Highland Council, are fixed fares and not dependent on the vehicle weight or composition.
Basis on which a vehicle is classified as a CV for charging purposes
2.2.5 The basis on which a vehicle is classified as a commercial vehicle for charging purposes differs across the different networks. All CVs (regardless of length) are charged commercial rates on Serco NorthLink, Orkney Islands Council and Highland Council services.
2.2.6 On the other networks (CalMac, Argyll & Bute and Shetland Islands Council routes), there is a length based threshold at which a vehicle becomes defined as CV rather than a car (typically 5-6 metres).
Fares Increase Mechanism
2.2.7 Only the two Transport Scotland tendered operators, CalMac and Serco NorthLink, have set fares increase mechanisms in place, both of which are based on CPI inflation and are determined by Scottish Ministers.
2.2.8 Fares increases on all council run services are determined by the councils themselves. Fares increases in Argyll & Bute Council and Orkney Islands Council services are generally based on inflation, except for in exceptional circumstances. Whilst Shetland Islands Council does not have any set fares increase mechanism in place, fares are regularly reviewed and any significant change to fares requires a strong political consensus. Fares increases on the Corran ferry services are determined by the need for cost recovery.
2.3 Network Specific Findings
2.3.1 The sections that follow provide a more detailed summary of the key findings by operator.
CalMac Ferries Limited
- CalMac Ferries Limited operates ferry services on 30 routes across the Clyde & Hebrides, under Public Service Contracts with the Scottish Government. The nature of the contract requires any change to fares to be agreed by Scottish Ministers.
- CV fares on CalMac services have been set using a number of different regimes in recent years due the introduction and subsequent removal of the Road Equivalent Tariff (RET) for CVs on one section of the network (ie the Western Isles, Coll and Tiree).
- there are currently differences in the classification of CVs across the CalMac network. On non-RET routes, CV fares are applicable only to CVs exceeding 5 metres (or exceeding 3 metres in height, 2.3 metres in width or 3.5 tonnes in weight) whereas on RET routes, the length restriction is increased to 6 metres. However, this discrepancy will be removed when RET is rolled out to the remaining CHFS routes in October 2015.
- currently, on all CalMac routes, vehicle length is the key variable in determining fares for CVs that are plated to operate in excess of 3.5 tonnes.
- on all routes (except those to the Western Isles, Coll and Tiree where RET was previously in place for CVs and subsequently withdrawn), the CV fare is the product of the vehicle length and the rate charged per half CV metre. The rate per half metre varies by route and is broadly based on the length of the crossing, with longer crossings generally having a higher rate per half metre. The rate per half metre is a flat rate which means a 14 metre CV travelling on a particular route would face a fare exactly double that of a 7 metre CV. Each year, the rate per half metre is increased by the general fares increase applied to all CalMac fares, which is generally based on CPI inflation.
- on the Western Isles, Coll and Tiree routes where RET was previously in place for CVs, the fare comprises a fixed element and rate per half CV metre. The rate per half metre is a flat rate, although the fixed element of the formula means that a 14 metre CV travelling on a particular route would face a fare less than double that of a 7 metre CV. CalMac offer a number of concessions to CVs. The availability of some discounts is dependent on whether RET is in place on the route (this is covered in more detail in the next chapter).
Serco NorthLink Ltd
- Serco operate ferry services on four routes to the Northern Isles using the 'NorthLink Ferries' name under Public Service Contracts with the Scottish Government. The nature of the contract requires any change to fares to be agreed by Scottish Ministers.
- Serco NorthLink does not distinguish between large and small CVs; irrespective of size, all CVs are charged at CV rates.
- CV fares are set in a consistent way across all Serco NorthLink routes. Vehicle length is the key variable in determining CV fares. The CV fare on a particular route is the product of the vehicle length and the rate charged per CV metre.
- the rate per metre is based on the length of the crossing, with longer crossings having a higher rate per metre. The rate charged per metre on a particular crossing is a flat rate so that a 10 metre CV travelling on a particular route faces a fare exactly double that of a 5 metre CV.
- separate rates per metre are in place for vehicles booking in advance and for vehicles booking three days or less prior to departure. However, in practice, the three day premium rate is rarely applied as most CVs book well in advance.
- 'Wide load' CVs greater than 2.6 metres in width are subject to a 50% surcharge on the standard fare.
- Serco is contractually required not to increase overall fares receipts, other than by Minister-approved annual increases based on CPI inflation. However, as set out in the contract, Serco NorthLink varies the fares increase at the individual route level as a demand management strategy.
Argyll & Bute Council
- Argyll & Bute Council run four ferry services within the local authority area. Three services are operated directly by the Council and one is contracted out. These services are funded by the Council and are indirectly subsidised by the Scottish Government through the block grant they receive. The Council has sole responsibility for setting and approving fares.
- two of the Council's ferry services are available for the use of large CVs. The other two routes are foot passenger-only.
- CV fares on Argyll & Bute Council routes are applicable only to CVs exceeding 5 metres in length. CVs under these measurements are charged as cars.
- for the most part, CVs are charged on the basis of length, with different fares charged for different bandings of vehicle length. These fare bandings differ by route. Fares per mile on the shorter Cuan-Luing route are higher than on the longer Port Askaig-Feolin route.
- whilst CV fares for the Port Askaig-Feolin route are published for single journeys, fares for the Cuan-Luing route are published for return journeys and five journey returns. Fares for both services exclude the driver and exclude VAT.
- marginally lower fares per journey are available to hauliers using the Cuan-Luing route through purchasing a five journey return ticket rather than the standard return ticket. The discount is however small, averaging at around a 2% reduction on the standard return fare. Discounts of this kind are not available on the Port Askaig-Feolin route.
- each year, with a few exceptional circumstances, Argyll & Bute Council ferry fares are subjected to an inflationary increase.
Orkney Islands Council
- Orkney Ferries Limited, a company wholly owned by Orkney Islands Council, operates the Orkney inter-island ferry services, connecting the Orkney mainland to 13 islands. These services are funded by the Council and are indirectly subsidised by the Scottish Government through the block grant they receive.
- fares structures and levels are set by the Council.
- the general rationale for the setting of CV fares is largely historical but has an over-arching basis of:
- location/journey time: there are four CV fares 'blocks' based on location / journey time: Outer North Isles; Inter-Outer North Isles; South & Inner North Isles; and Inter-South & Inner North Isles.
- vehicle length: All CVs are assumed to be 5m or over (if a CV is under 5m, it is charged the 5m fare) and the charging regime is based upon increased charges for every 0.5m increment over 5m.
- the standard single CV fare for a route in any of the four blocks is calculated using the same method. The fare is calculated as a fixed charge plus the product of the rate charged per half CV metre and the number of half metres the CV's length is in excess of 5m. In this way, a 5m CV will only be charged the fixed charge.
- both the fixed charge and the rate per half CV metre vary by route, with the longer routes having a higher fixed charge and a higher rate per half metre. Published CV fares are generally for single journeys and exclude VAT. Fares exclude the driver.
- Orkney Islands Council undertakes annual reviews to inform the setting of the following year's tariff. Ordinarily, fares are subject to an inflation-based uplift however the Council takes local economic conditions into consideration when deciding whether or not to impose an increase each year.
- two forms of concessions are available to CVs which significantly reduce the fare paid per single journey - multi-journey tickets and automatic discounts. These discounts are available for CVs travelling on all four CV fare blocks.
- multi-journey tickets, which are available to all hauliers paying up-front, can reduce the fare paid for a single journey by 25%-50%.
- automatic discounts are available to Orkney-based Account Customers only and allow hauliers to benefit from a discount without having to pay the high cost of a multi-journey ticket upfront. The discount received differs depending on whether the Account Customer is Orkney mainland-based or Orkney-isles based.
Shetland Islands Council
- Shetland Islands Council is responsible for the network of inter-island ferry services, connecting the Shetland mainland with nine islands. These services are funded by the Council and are indirectly subsidised by the Scottish Government through the block grant they receive.
- all services, except one, are operated directly by the Council. The Council has sole responsibility for setting and approving fares.
- most services, with the exception of services to Foula and Fair Isle, are Ro-Ro and are available for the use of self-propelled commercial vehicles.
- the Council classifies commercial vehicles into three categories: commercial vehicles; tankers; and plant.
- CV fares on Shetland Islands Council services are determined by two factors:
- Vehicle type: separate fares structures are in place for traditional CVs and tankers.
- vehicle length: different fares (rather than rates per metre) are in place for different ranges of vehicle length, with the length bandings depending on the vehicle type (5.51m-8.00m, 8.01m-12.00m and 12.01m-18.00m for commercial vehicles and up to and including 7.5m, 7.51m-10.00m and 10.01-16.00m for tankers).
- there is some inconsistency in how CVs are treated for charging purposes in terms of vehicle length. Fares for CVs (as defined by the Council) are in place for CVs of length 5.51m or over. CVs under this length are charged as cars. Tankers are however all charged commercial rates, with the lowest fare band taking in all tanker lengths up to and including 7.5m.
- there is some inconsistency in how fares are presented. Whilst fares (for both CVs and tankers) for services to Bressay, Whalsay, Yell, Unst and Fetlar are published for return journeys, fares for services to Skerries and Papa Stour are published for single journeys. However, when the return fares are converted to a single journey equivalent, we see that fares are equal on all routes so that a CV of a particular length travelling on any inter-island route will face the same fare and a tanker of a particular length travelling on any inter-island route will face the same fare (albeit at a different rate to that faced by a commercial vehicle). This flat fares structure is not seen in any other part of the Scottish ferries network.
- as a flat fare is charged regardless of the route, the fare per (route length) mile decreases as route length increases. This results in a significant spread in the fare per mile charged across the network with CVs on the longest route facing a fare per mile of £1.14 and CVs on the shortest route facing a fare per mile of £52.20.
- fares for both CVs and tankers include VAT and include the driver.
- there is no set fares increase mechanism for fares on Shetland Islands Council services. There is no restriction on increases/decreases in fares however any significant changes require strong political consensus to implement.
- Shetland Islands Council does not offer concessions for CVs on any of its routes.
- Highland Council runs / tenders four ferry services in the Highland area. Two of these services carry large CVs. These services are funded by the Council and are indirectly subsidised by the Scottish Government through the block grant they receive.
- whilst the Council itself operates the Corran ferry, operation of the Cromarty-Nigg ferry is contracted out.
- For the Corran Ferry:
- Highland Council has sole responsibility for the setting and approval of fares on the Corran ferry. For those services that are tendered out, the setting of fares is at the operator's discretion. The setting of fares on Highland Council services therefore differs by route / operator.
- in contrast to the other operators who generally charge by vehicle length, Highland Council classifies CVs according to weight and vehicle type for charging purposes.
- CVs under 3,500kg are classified as 'light goods vehicles' (LGVs) and are charged the same fare as private cars. CVs over 3,500kg are classified as 'heavy goods vehicles' (HGVs) with the fare charged increasing with the number of axles and the vehicle weight.
- published rates for HGVs are for single journeys and include VAT. The driver is not charged.
- books of 30 tickets are available for LGVs (and private cars) and HGVs. These ticket books reduce the price paid for a single journey and are therefore effectively a concession for frequent ferry users. The discount received when purchasing as part of a 30 ticket book ranges from 71% for an LGV (and private car) to 11-15% for an HGV. Evidence suggests that this concession is well used, with 85% of LGVs travelling using discounted tickets in 2012/13.
- the level of fares set by Highland Council is primarily determined by their wish for the service to operate without subsidy. Changes in fares therefore appear to be broadly determined by changes to costs.
- For the Cromarty-Nigg Ferry:
- the Cromarty-Nigg ferry is privately operated by the Cromarty Ferry Company and not the Highland Council. However, the service is funded by the Highland Council.
- in contrast to the other operators who generally charge by vehicle length, the fares for CVs carried in the Cromarty-Nigg service are fixed. This results from the vessel's capacity constraints; it can only carry vehicles with maximum length of 6 metres.
- the published fares for vehicles larger than cars are for 'Mini buses', the category CVs up to 6 metres fall into.
- published rates for Mini Buses are for single journeys and return journeys and include VAT. They are fixed fares and do not vary by vehicle length. The driver is not charged.
- the fare is essentially historic and it has not been reviewed in recent years. The fare has only been adjusted through a series of inflationary increases.
- on the Cromarty-Nigg service when a return ticket is purchased, a discount of 22% is received. No other concessions are available on the route.