Task Force on LA Ferry Fleet Replacement - meeting with Orkney Islands Council (OIC) - minutes - 17 August 2023
Attendees:
- Fiona Hyslop MSP, Minister for Transport
- Cllr James Stockan, Leader, Orkney Islands Council
- Cllr Heather Woodbridge, Depute Leader, Orkney Islands Council
- Oliver Reid, Chief Executive, Orkney Islands Council
- Gareth Waterson, Director of Enterprise and Sustainable Regeneration, Orkney Islands Council
- Roddy Macdonald, Director of Ferries, Transport Scotland
- Gary Cox, Director of Aviation, Maritime, Freight and Canals, Transport Scotland
- Official, Ferries Directorate, Transport Scotland
- Joe Brown, Orkney Location Director, Scottish Government
- Official, Ferries Directorate, Transport Scotland
- Official, Finance and Corporate Services Directorate, Transport Scotland
- Official, Senior Finance Business Partner, Scottish Government
Agenda
Item 1 – Introduction
The Minister advised that she would Chair the meeting in the absence of the Deputy First Minister who was on leave. The DFM wished to chair future meetings of the Task Force. The Minister noted that difficulties in providing reliable and affordable connectivity for the communities in Orkney were well understood, hence the importance of the partnership approach and the Task Force.
Item 2 – Presentation on ferry operations
The Task Force agreed that agenda items 2 and 4 would be combined.
Oliver Reid gave a presentation outlining the extent of the services being provided in Orkney, the challenges being faced, the benefits of accelerating a ferry replacement programme and potential options for securing lifeline connectivity going forward.
The Task Force discussed the various points covered in OIC’s presentation.
Councillor Stockan said OIC was clear that provision of connectivity within Orkney, whether by ferry or aircraft, was the Council’s responsibility but it was not currently funded for new infrastructure to deliver these services and revenue funding to run/deliver services was not currently sufficient. He noted the Council has invested from reserve funds which was not sustainable in the longer term.
The Minister thanked OIC for their presentation and the helpful discussion on the key points raised. She noted that a range of different funding models and mechanisms would need to be examined. It was clear that Brexit meant opportunities such as the European Regional Development Fund was no longer an option for supporting essential connectivity in Orkney, and the UKG Levelling up fund does not provide equivalent support for infrastructure. Councillor Stockan said he had written to the Prime Minister given the UKG’s previous responsibility for the services and the transfer to OIC in the 1980s. The Prime Minister had replied stating that investment in vessels and infrastructure was a devolved matter. Councillor Stockan said OIC would still pursue the UKG, ideally in partnership with the Scottish Government.
The Minister noted that her focus would be on how best to secure a positive outcome for the communities in Orkney. SG Finance, working with TS, agreed to brief the DFM on the wider context presented by OIC, and the context that led to the challenges being faced. The overall position on capital funding was well understood by all partners in the public sector with budgetary pressures already being carried.
Roddy Macdonald asked if vessel replacement had been prioritised or was it a case of replacing the oldest vessels first. Oliver Reid noted that the age and reliability issues were common across most vessels which mean most would need to be replaced quickly.
The Task Force discussed the benefits of more standardisation across the fleet generating economies of scale. Even with standardisation, it was estimated that a fleet replacement programme would take 6 to 8 years, however, regardless of the timeline, OIC was keen to get started with such a programme.
Item 3 – Discussion on revenue funding
The Minister confirmed that 2023-24 grant offer had now been issued to OIC.
Item 4 – Overview of fleet investment needs
Discussed under item 2.
Item 5 – Discussion on funding models, funding sources, business case and technical expertise/resources
The Task Force discussed alternative funding models including direct capital grant, borrowing from SNIB or the Public Works Board, and the potential for investment by sovereign wealth funds, other private investors, or private sector leasing options. Funding models would need to be developed alongside the business case, and the business case would benefit from ongoing engagement with CMAL given their technical expertise. The VFM case for each option presented in the business case would need to be robust in setting out the most cost effective approach.
The Task Force also noted that demand for vessels in Scotland may increase as a result of offshore wind and there may be scope to partner with other agencies looking at vessel procurement. Councillor Stockan also noted that connectivity had to be examined in the round, with flights being part of the solution rather than competing with ferries on some routes.
Item 6 – CMAL review
It was noted that CMAL’s assistance had been very helpful and there was a desire to see its engagement continue.
Item 7 – Next steps
It was agreed that officials would continue to meet regularly to take forward actions and the next Ministerial/Councillor Task Force would be set up. Cllr Stockan requested that this be in September if possible, however, this would depend on Ministerial diaries.
Action-Owner
- Brief DFM on outcome of the meeting - SG Finance and TS
- SG Finance and TS officials to work with OIC to scope out potential funding models - TS/SG Finance/OIC
- TS to liaise with CMAL to discuss ongoing technical support as business case is developed - TS