Isle of Wight (Ferries)

Andrew Turner Excerpts

Monday 13th October 2014 Commons Chamber

[Mr Andrew Turner (Isle of Wight) (Con)]

At its closest point, the Isle of Wight is just 4 miles from the mainland, but if one cannot cross that stretch of water when one needs to at a reasonable cost, the mainland might as well be a thousand miles away. We have no scheduled air services, so the two ferry operators and the hovercraft provide lifeline services for island residents. They also carry visitors and holidaymakers, business traffic and goods, and, of course, islanders and their families and friends.

The ferry links are essential to our economy. We need them to be regular, reliable and affordable. The two main operators each have an effective geographical monopoly on their own routes. Islanders have always grumbled about the ferry services. It is a popular local pastime. But the ferry companies were taken over by huge financial institutions—Wightlink by Macquarie in 2005 and Red Funnel by Prudential in 2007. Since then, things have become more difficult for the ferry companies.

The companies were sold during the boom years for completely unrealistic sums. The then chief executive walked away with £30 million when Wightlink was sold to the Australian Macquarie bank. He and other former owners have benefited hugely, but the island’s economy has suffered. Like all islands, the Isle of Wight faces particular challenges. Looking at a key economic measure, the gross value added figure for Hampshire is well over £22,000. On the island, it is a smidgeon over £14,000. Our economy is fragile and wholly dependent on good connectivity.

In 2008, I asked the Office of Fair Trading to investigate the cross-Solent ferries. The OFT suspected that there were issues

“preventing, restricting or distorting competition”

but found

“limited evidence of consumer detriment”.

But I do not think that it looked very hard to see the damage being done to the island, because it also made it clear that there was no obvious regulatory answer to the problems. When it found no easy answers, it put it in the “too hard to deal with” box and closed the lid. The blunt truth is that Macquarie and Prudential paid well over the odds for these lifeline public services, but it is the island and islanders who are suffering from over-inflated prices and service cuts caused by those decisions.

It is sometimes claimed, including by the ferry companies, that talking about high ferry fares damages tourism, but they never suggest that the fares themselves might put off tourists. David Thornton of Visit Isle of Wight says that he gets few complaints, but he does not hear from people who do not visit the island because the ferry is too expensive. Tourists sometimes get very good deals. Some buy packages with a low ferry price hidden in the total. Surely it has got to the point of madness when it can be cheaper to book a week’s holiday, including the ferry and accommodation, than to pay for the fare alone. Some visitors come for an annual break or a few days away. They book in advance and can be flexible about the route and time of travel. They, too, can get reasonable fares. But those who need to get to work, education, a hospital appointment or a funeral do not have that flexibility, and it is overwhelmingly the islanders who make such journeys.

I believe that the huge debts of the two ferry companies have prevented them from serving islanders as well as they should. By contrast, Hovertravel, a UK family-owned firm without any debt, has high levels of customer satisfaction. In 2012, Wightlink’s debt was £192 million on a turnover of £59 million. Red Funnel was in a better position, with £80 million of debt on a turnover of £14 million. The ferry companies deny that such large debts could have an impact on their services, but the OFT disagreed, stating:

“We remain of the view that the high levels of debt and gearing carry a higher risk…that the operators might have to cut back on service improvements.”

I told the OFT that if it did not act, prices would rise and services would go. Since its report in 2009, Wightlink has cut crossings by 26% and Red Funnel has cut them by 14%. It is very difficult to compare prices for vehicle travel because of the airline-style yield management pricing that both ferry companies use. Fares change constantly, and some of them are eye-watering, with people paying up to £200, or even more, for a vehicle crossing.

Two initiatives, the Isle of Wight Better Ferry campaign and the “Are Wightlink the Right Link” Facebook group, have 5,000 supporters between them. I would like to give a flavour of some of the comments:

“I’m fed up with not being able to book with my Multi-Link ticket, only to find that there are dozens of spaces if I pay the Non-Residents fare. Get a grip, Wightlink.”

Another islander says:

“My daughter and grandchildren live on the mainland. They can’t afford to visit the island and I haven’t seen them since February.”

Here is another comment:

“Once again, same ferry, same stretch of water, same travel time but different prices…They’re pirates.”

I have deleted the expletive. Here is another comment:

“Both these companies are disdainful of their captive market and are doing a huge amount of damage to the island economy.”

Finally:

“It’s just too expensive to get off the island. It’s not fair for island people. The prices make it difficult for us to take our children over to see friends and relatives. Please do something about this. Make a blessed change.”

There are hundreds of similar comments, and more are added every day.

I thank the Better Ferry campaign, which has supported me on this issue for years, and John Keyworth and Steven Caudle, who set up the Facebook page. John Keyworth told me:

“Since we set up our campaign, we have been flabbergasted at some of the stories that we’ve heard. There are very high levels of distrust and concern at the outright abuse and overcharging by this industry which provides an essential service to Island residents.”

The Barnett formula gives the Scottish Parliament money to spend on many things that this Government cannot afford. CalMac provides ferry services to Scottish islands. It received a grant of £73 million last year—more than half its revenue. My constituents living on the island receive no such benefits. They pay the full operating costs and profits, and the fares that they pay also have to service the company’s massive debts. Through their taxes, they subsidise Scottish ferries. Will the Minister explain why Scottish island residents get a much better deal than my constituents? For the life of me, I cannot. Channel islanders are protected from unfair ferry fare increases because the companies operate under licence from the islands’ authorities—another protection denied to Isle of Wight ferry users.

There are other worrying issues. Wightlink operates a multi-link ticket system for islanders. People pay for multiple crossings, giving the company hundreds of pounds in advance. They are rewarded for their loyalty by being denied access to many popular ferry crossings. In July this year, the mezzanine deck on the 30-year-old St Helen ferry collapsed. The investigation is ongoing, but even before that happened it was known that St Helen would need to be replaced. However, we are told that there is no money in Wightlink’s coffers to replace her and the banks are apparently refusing to stump up. I have yet to hear plausible plans from Macquarie to maintain this vital link for the island’s economy.

In preparing for this debate, I spoke to all the operators, including Kevin George, the new chief executive of Red Funnel. Under his leadership, Red Funnel seems to be getting it and is looking for ways to address some of the concerns—2014 prices have been held into next year; ferries refurbished at a cost of more than £2 million each; there has been a greater focus on customer satisfaction; and there are new plans and discounts designed to benefit islanders.

Red Funnel has been taking market share. Recent figures show that, for the first time in living memory, it has overtaken Wightlink as the most popular route to the island. In a properly competitive market, that would be good news, but in a duopoly with no prospect of new competitors, it can be destabilising. It is more difficult for the company losing market share to build an investment strategy and to develop services rather than cut them. Worse still, if the trend continues, the company taking customers may be unable to cope properly with the increased demand. That could lead to deteriorating services or even price increases to manage the market.

The UK’s largest constituency needs support. One option would be helping us to go back to the competition authorities. The customer detriment not found by the OFT in 2009 is now woefully apparent. I hope that my right hon. Friend the Minister will support us if we need to do that. However, even if we do there is still no easy regulatory solution, so I want to suggest a bigger and more imaginative way forward.

The island must find a sustainable solution to its transport issues. To be fair, the ferry companies, their owners and the banks also need to find a way forward. There have been constructive discussions between the Better Ferry campaign and the owners of Wightlink and Red Funnel. If we could find a new way of managing our transport infrastructure in which the ferry owners had a smaller stake in a bigger investment pot, they might welcome the reduction of risk. We need a model in which the community’s needs are recognised and addressed. The ferry owners would need to be realistic and take a patient approach, but we may be able to find a structure with a longer-term opportunity for investment, and we would surely want them to participate. The island would then have a public transport system that addressed the unique challenges that separation from the north island present.

The current ownership model of the ferry companies represents a real danger to the island’s economy, because the ferries are just small cogs in much larger businesses. They are expected to achieve profitable growth to enhance their market value. The end game is typically to sell them on for a higher price than was paid for them, scooping a windfall profit. However, that would burden the companies with even more debt on which interest must be paid from the fares. It is therefore a totally unacceptable model for businesses with weak competition offering lifeline services.

I ask the Minister to help us to explore whether there is a possible win-win situation. The future of Island Line, our railway, is under review. I have been involved in asking the Government to support an expert taskforce to look carefully for a viable, long-term outcome for Island Line. I would ask that this taskforce is not only supported but extended to include the whole of the island’s transport infrastructure. We need to take the connectivity of the Isle of Wight out of the “too-difficult” box that the OFT put it in in 2009. This must not be a way of kicking the issue into the long grass but a genuine attempt to find the best way forward, with support and expertise given by the Government. There is already support on the island for such an approach, and we can work to build allegiances on a cross-party basis to find a solution to this difficult situation. Informal discussions with Isle of Wight council have been encouraging. One of its priorities is to improve cross-Solent travel so that it is secure, accessible and affordable. This is a positive way of delivering that aspiration.

At the request of the ferry companies, I would like to turn to two further issues: first, tonnage tax. In January 2000, Red Funnel entered the tonnage tax regime. Her Majesty’s Revenue and Customs now wants to throw it out. After mountains of correspondence, HMRC, in some desperation, decided that the Solent no longer qualifies as a sea. I would be very grateful if Department of Transport officials tried to help to resolve this. Secondly, Wightlink is concerned about the effect that new marine conservation zones may have on its operations. I hope that the Minister will support me in making representations to colleagues in the Department for Environment, Food and Rural Affairs for these costs to be taken seriously.

My right hon. Friend is also a friend in the much more widely used sense of the word, and I would like to extend an invitation to him to visit the island once again. I will work with his office to put together a useful itinerary, as I did when he held another ministerial post. During that visit, as so often, he went a little off-message and said exactly what he thought. I very much look forward to him doing so again in his current job, and in doing so helping us to find a creative solution to the long-standing transport issues that beset the Isle of Wight.

[The Minister of State, Department for Transport (Mr John Hayes)]

Donne said that

“No man is an island”,

but can there be a Member of this House who is more for and of the people he represents than my hon. Friend the Member for Isle of Wight (Mr Turner), who so admirably and with such dedication advances the case of the island people of his home? You know as well as I do, Mr Speaker, that one should not be a captive of the ordinary, and my hon. Friend is extraordinary in his dedication to this subject, which he has taken up on many occasions. He met me recently to take the case further, and he has secured this debate, on which I congratulate him.

Moving reluctantly from the metaphysical to the literal, it is my duty in the short time available to avail the House of a variety of facts relating to the case my hon. Friend has made. The essence of his argument—which he described tellingly as an imaginative solution to the island’s problems—seems to me to be absolutely right. I know that he has worked very hard for many years on behalf of his constituents in raising concerns about cross-Solent issues. He did so with my predecessors—my hon. Friend the Member for Wimbledon (Stephen Hammond) and my right hon. Friend the Member for Hemel Hempstead (Mike Penning)—as well as with the ferry operators. He has worked hard behind the scenes, as well as in his public activities, to ensure that his constituents’ concerns are raised. His persistence, dedication and continued work are most welcome and have, of course, led to today’s debate.

Ships and ports are vital to the economic well-being of this island nation, and so much of this country’s trade—95% by volume—arrives or departs by sea. That is doubly so for our island communities, of which the Isle of Wight is the largest and most populous, as my hon. Friend has said. Ferries are vital to the island, not only for those who work on the mainland each and every day, but for all the island’s residents, as they are the only means for goods to reach the shops and for products to be exported.

The three ferry operators—Red Funnel, Wightlink and Hovertravel—are clearly well used, with nearly 9 million journeys each year between Hampshire and the island across six routes. That is nearly 25,000 journeys a day on roughly 200 sailings to and from the island.

It was not until I was preparing for tonight’s debate that I realised the long history of the Red Funnel services, which go back nearly 200 years. The company that operated the Isle of Wight Royal Mail Steam Packet Company began those journeys from the island to Southampton and back in 1820. Hovertravel is the world’s longest-running hovercraft service: it was established in 1965 and is currently the only scheduled passenger hovercraft service in Europe. That shows the long history of innovation among those serving the needs of the Isle of Wight’s inhabitants.

Those innovations were by commercial operators, and decisions on the service levels today have to be for the three individual commercial ferry operators to make, without Government support. Similarly, the level of fares is also a commercial matter, although I hear what my hon. Friend says: I understand his concern about the impact that fares have both on his constituents and on visitors to the island. Through the use of season tickets and discounts for island residents, fares can be less expensive. I shall come in a moment to my hon. Friend’s other, broader ideas about how costs can be driven down.

As with railway services, those who wish to turn up and go will find their tickets more expensive than those bought in advance. That means that fares on some services may be more expensive than on others, which is to the detriment of those who are unable to be flexible on the timing of their journeys or who are unable to book in advance.

My hon. Friend referred specifically to the 2009 report by the Office of Fair Trading, which was replaced by the Competition and Markets Authority in April when the OFT was merged with the Competition Commission. The report summarised and its press notice concluded:

“The OFT’s study found limited evidence of problems for consumers that interventions in this market could address, but found room for improvement both in customer satisfaction levels and the amount of information available to users on the performance of the ferry operators”.

I understand that both Red Funnel and Wightlink provide information on their websites on service performance and customer satisfaction. I would hope that they and Hovertravel will continue to improve the information provided to their users. That is vital if more people are going to take advantage of the discounts I mentioned a moment ago and, therefore, avoid the higher fares.

Establishing user groups, as Wightlink has done with its two ferry user groups, can allow company managers to understand better the concerns of their customers and what impact changes to services and facilities will have on them. It is important that such opportunities are used.

There are improvements in the pipeline. In July, as part of the local growth funding, the Solent local enterprise partnership included £15 million of funding to modernise the Red Funnel terminals in East Cowes and Southampton. Part of that—£6 million—will be available in 2015-16 and it will be matched by Red Funnel investing £15 million to refurbish its fleet. That will allow the ferry terminals to be moved, which in turn will allow important regeneration schemes for East Cowes and Southampton royal pier to proceed. For East Cowes, this will allow for 550 new homes and provide 48,700 square metres of business space. It is an important development for the island, to ensure economic growth as well as provide much needed housing. I spoke about that to my hon. Friend when we met recently.

My hon. Friend mentioned the Isle of Wight Better Ferry campaign, which seeks a fairer and more flexible ferry service for the island through the community working with ferry operators to improve efficiency, flexibility and good connections at fair prices. That is part of a bigger campaign to get Isle of Wight council to develop a plan for building infrastructure for all transport on the island. Hence his proposal for a taskforce to review the whole of the island’s transport infrastructure, look at what is needed and identify a solution.

[Mr Andrew Turner]

Will my right hon. Friend encourage members of the public and businesses such as Red Funnel, Wightlink and Hovertravel, as well as the council, to look at the issues as soon as possible?

[Mr Hayes]

I want to go a lot further than that, because my hon. Friend has made a persuasive case tonight. If Adjournment debates mean anything, they mean Members influencing how the Government do their business, as I know you would acknowledge, Mr Speaker. It would be helpful for me to meet my hon. Friend, the different ferry operators and perhaps other interested parties, such as the local council, to hear at first hand the challenges that they face and to encourage their participation in exactly the kind of holistic review of transport infrastructure that, as I know, is so dear to his heart.

It would be my pleasure to host the review, which should work, where appropriate, with bus and train operators to co-ordinate departures and arrivals of services to facilitate journeys, and should consider the long-term transport needs of the island’s residents and visitors. It would have to be done with a bottom-up approach, led by those who know best—those who deliver the services and those who know the needs of the island—but if we can act as a facilitator or co-ordinator, I will be delighted to do so.

My hon. Friend has done a great service to the House by drawing its attention to the kind of imaginative approach that he outlined and which I have endorsed. The Government very much support such an approach. As he knows, we have adopted it with local enterprise partnerships, which bring together local authorities and businesses to agree infrastructure priorities in their area for which they can bid for local growth fund resources. It is only by working together that businesses and local government can ensure that funding decisions made by central Government have the relevant impact in meeting local peoples’ needs. That is precisely what my hon. Friend has epitomised—indeed, one might say which he personified —in his helpful contribution.

I have no desire to delay the House unduly, but I must suggest that my hon. Friend work closely with the Isle of Wight council—he mentioned this himself—to establish a team or what we might call a taskforce to prepare the terms of reference so that we can begin to put together the plan that he outlined to me briefly in private and has now described to the House.

As my hon. Friend spoke tonight, I thought of Dryden, as I am sure you did too, Mr Speaker. Dryden said:

“Fairest Isle, all isles excelling,

Seat of pleasures, and of loves;

Venus here will choose her dwelling,

And forsake her Cyprian groves.”

I do not think that Dryden was speaking of the Isle of Wight, but he might well have been. In bringing these matters to the House’s attention, my hon. Friend has not only won my support for the concept of examining them in a more rounded way, but done a great service to his constituents, once again confirming himself as the lord of his isle.

Question put and agreed to.