Defence in Scotland

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The Minister of State, Scotland Office (Mr. George Foulkes): I congratulate the hon. Member for Argyll and Bute (Mr. Reid) on securing a debate on an issue that I know is of importance to the United Kingdom,

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to Scotland in particular and, above all, to his constituency, which is in a beautiful part of the world; almost as beautiful as Carrick, Cumnock and Doon Valley.

I understand most of what the hon. Gentleman said. I do not disagree with his criticism of Mr. MacGregor, who has caused us many problems. The hon. Gentleman says that transport is our Achilles' heel, but I am sure that if he gave the matter further consideration, he would realise that we had a huge mess to clear up. The investment that we have made and the reform that we have undertaken are improving matters. It will take time, but we are determined to make sure that we have a first-class public transport system—on land, sea and air—that is suitable for the 21st century.

His question of what is an island is almost philosophical, although I am sure that there are practical determinations of it. As to the European Union's decision on whether Ceuta and Melilla are islands, it seems from what the hon. Gentleman says that the EU has power that even the Lord God Almighty does not have.

When considering maritime legislation within member states, we are principally considering two documents: first, Council regulation 3577 of 1992, which sets out the freedom to provide maritime transport services within member states and, secondly, the European Commission's community guidelines on state aid to maritime transport, which were published in 1997. The latter is not a piece of European legislation, but it provides detailed guidance on how the 1992 regulations and other matters such as social security and taxation for seafarers should be interpreted and implemented in member states.

The 1992 regulation forms an integral part of the framework of the single market. The aim is to provide for free and open access to shipping services throughout the Community. The Government believe that, if fully achieved, that liberalised market offers British—including Scottish—companies good commercial opportunities throughout the EU that outweigh any potential implications of opening up our own domestic public services.

I agree that no system is perfect. The Commission is sensibly looking at how the legislation operates in practice and it will issue two documents later this year. The first is the Commission's stated five-year review of the Community guidelines, which is expected to be finished by the summer. The second is a communication on the interpretation of the 1992 regulations. It will seek to clarify issues that have arisen in implementing the regulations and may include the issue of the treatment of services to small islands. The hon. Gentleman is concerned about that. That communication is expected at around the end of the year. The Commission will seek the views of the member states on both of those documents. The Government will ensure that Scottish concerns are taken into account both through direct contact with the industry and our contacts with the Scottish Executive.

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I mentioned earlier that maritime legislation was of particular importance to Scotland. That is especially so in relation to our extensive coastline, with its many peripheral and island communities where the provision of ferry services has social importance. As hon. Members will be aware from the previous Adjournment debate of this Committee, initiated by my hon. Friend the Member for Greenock and Inverclyde (David Cairns), European maritime legislation is not flexible enough to rule out state intervention of any kind. The 1997 Community guidelines provide for member states to declare a public service obligation in circumstances where the market would not be able to provide the required levels of service to meet lifeline or economic development needs.

The declaration of a PSO by a member state allows for a public subsidy to be paid to an operator identified through a properly conducted tendering process. Within Scotland, that procedure has been or is in the process of being applied in three instances: the services to and within Orkney and Shetland; the services on the west coast currently served by CalMac and the proposed new Campbeltown to Ballycastle service. The latter two are of course of direct importance to the hon. Member for Argyll and Bute and I am aware of and appreciate the interest he has shown in these matters over a long period.

While overall responsibility for European Union matters and for general shipping policy is reserved, as expected, from the primary purpose of those services, the Scottish Executive are responsible for the current CalMac tendering process. The Scottish Executive are, in fact, the owners of CalMac, whose current services operate solely within Scotland. Subject to the agreement of both this and the Scottish Parliament—and in co-operation with Northern Ireland Ministers—Scottish Ministers will also be responsible for services between Campbeltown and Northern Ireland. An order to devolve executive powers to Scottish Ministers under section 63 of the Scotland Act 1998 will be laid in this House shortly. I encourage him to keep pressing his hon. Friends in the Scottish Parliament just as I continue to press mine to make sure that we get a speedy response from them.

The hon. Gentleman will be aware of the role that the Scotland Office has played in helping to bring the Ballycastle to Campbeltown service to the point where both Scottish and Northern Ireland Ministers are publicly committed to tendering for an operator to begin services next spring. The Government have also worked closely with the Scottish Executive in presenting arguments to the European Commission to ensure that the best possible structure for CalMac services may be put out to tender. Just as we have been working with the Executive on Campbeltown to Ballycastle, we have worked with them on the tendering of the CalMac services.

I understand that Scottish Ministers will issue draft service specifications for the CalMac routes shortly. Those specifications will provide for a single tender for the whole route network. I am sure that the hon. Gentleman will understand the importance of that. However, I am sure that he will also appreciate that as

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it is a matter for the Scottish Parliament, it would not be appropriate for me to comment in more detail on the specific aspects of the tendering exercise. I will comment further on the issue of EU legislation for which this House has responsibility. I note that there has been some. As Chairman of the European Scrutiny Committee, Mr. Hood, you are probably one of the greatest experts on this matter in the House. You probably understand all this better than anyone else in the Committee.

There have been some objections to the necessity of tendering the CalMac services under the terms of the 1992 regulations. I should first state that the Government's and the Scottish Executive's legal advice refutes that position. Examples in other member states also bear that out. As the hon. Gentleman said, derogations were negotiated for several Mediterranean member states. They were, and are, intended to be only temporary measures. The derogations for Portugal, Spain and France expired in 1999. In those countries, relevant ferry and shipping services have all since been subject to open tendering exercises. The remaining derogation relates to Greece, and is due to expire in 2004. Following a series of tragic accidents in 2000, however, the Greek Shipping Minister at that time undertook to remove the derogation by October 2002.

I do not get as many opportunities to travel overseas in this job as I did in my previous one, so however much I would love to take up the suggestion made by the hon. Member for Argyll and Bute that I go to Brussels, I fear that on this occasion it would be likely to be a futile exercise. The hon. Gentleman has drawn comparisons in the past between the treatment of the proposed service from Ballycastle to Campbeltown and the freight facilities grant that was awarded to improve port facilities at Rosyth for the new service to Zeebrugge.

I will clarify the Government's view, and I hope that the hon. Gentleman will understand and appreciate it. The main purpose of financial support for both projects is to support policy aims that fall within devolved responsibilities. For the Ballycastle to Campbeltown service, the main purpose is local economic development, but for the port facilities at Rosyth, it is the environmental benefit of removing lorries from the roads. In both instances, Scottish Ministers requested that powers to pay grants be devolved to them. The Government have looked closely at the merits of each case and have agreed in principle to those requests. An order to devolve powers covering aid to the Ballycastle to Campbeltown service will shortly be laid before Parliament. Exchanges are also continuing on the detail of extended freight facilities grant powers for Scottish Ministers.

In the case of Rosyth, Scottish Ministers requested that my right hon. Friend the Secretary of State for Transport, Local Government and the Regions exercise his powers to pay grant under the Transport Act 2000 in advance of the devolution of powers to Scottish Ministers. That was in order to guarantee that works began on schedule. The cost of the freight facilities grant will be met from Executive resources

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that will be transferred to the Department for Transport, Local Government and the Regions for that purpose.

European Union legislation on maritime transport services is another example of the Government working in partnership with Scottish Ministers to deliver real benefits to Scotland. We will hear more examples this evening. My right hon. Friend the Secretary of State and I will continue to do our utmost

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to ensure that that partnership continues and develops.

I thank the hon. Member for Argyll and Bute again for raising this important issue. I did not take up his offer to go to Brussels for reasons that I hope he will understand, but I hope that he will appreciate the Government's view. I also hope that I have moved the matter a step forward.

Question put and agreed to.

Adjourned accordingly at twenty-three minutes past One o'clock.

The following Members attended the Committee:
Hood, Mr. Jimmy (Chairman)
Barrett, John
Begg, Miss
Brown, Mr. Russell
Cairns, David
Campbell, Mr. Menzies
Carmichael, Mr.
Clark, Dr.
Clarke, Mr.
Connarty, Mr.
Dalyell, Mr.
Donohoe, Mr.
Doran, Mr.
Duncan, Mr.
Ewing, Annabelle
Foulkes, Mr.
Harris, Mr. Tom
Ingram, Mr.
Joyce, Mr.
Kennedy, Mr.
Lazarowicz, Mr.
Liddell, Mrs.
Luke, Mr.
McAvoy, Mr.
MacDougall, Mr.
McGuire, Mrs.
McKechin, Ann
McKenna, Rosemary
Murphy, Mr. Jim
O'Neill, Mr.
Osborne, Sandra
Reid, Mr. Alan
Robertson, Angus
Robertson, John
Ross, Mr. Ernie
Roy, Mr.
Salmond, Mr.
Sheridan, Jim
Smith, Sir Robert
Squire, Rachel
Stewart, Mr.
Thurso, John
Tynan, Mr.
Weir, Mr.
Wishart, Pete
Wray, Mr.

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Prepared 5 March 2002