The public ferry company, Caledonian MacBrayne, could go bust and vital transport links to the islands be lost if the European Commission wins a prolonged legal battle with the Scottish government, officials have warned.
Such a stark scenario, revealed in an internal government database obtained last week by the Sunday Herald, would be “scandalous” and “outrageous”, say experts. Some are even daring the commission to go to court to bring the matter to a head.
Since July 2005, UK and Scottish ministers have been facing legal action from the EC for subsidising CalMac ferries in contravention of European law. The subsidies are alleged to be unfair state aid to a monopoly, and to breach maritime regulations.
This year government-owned CalMac is receiving £43 million from taxpayers in support of its 24 routes to the Hebrides and islands around the Clyde. In an attempt to comply with European law, the previous Scottish Executive put CalMac routes out to tender.
But the threat of legal action has not gone away - far from it. “The accusation is that subsidy payments for lifeline ferry services in Scotland have been made illegally,” records the Scottish government’s up-to-date database of all legal disputes with the EC, released under freedom of information legislation.
“If found guilty the commission could request that CalMac, which is wholly owned by ministers and does not have large reserves of money, could be forced to repay subsidy which would potentially bankrupt the company and could leave our most fragile peripheral communities with no links to the mainland - or other island communities.”
Under the heading “potential problems” the official database warns that the EC will commence “infraction proceedings” if previously paid aid is deemed illegal. Elsewhere it states: “We understand that the commission intend carrying out a review but no official confirmation as yet.”
The prospect of a legal victory for the EC will alarm island communities the length of the west coast. “Were Brussels to close down the ferry services, the outrage would not only be felt in Scotland, but across Europe,” predicted Neil Kay, a ferry expert and emeritus economics professor at the University of Strathclyde.
He personally doubted whether it would be allowed to happen, and suggested that it was a scenario conjured up by the previous administration to help persuade people of the need to put CalMac routes out to tender.
Kay pointed out that the problem was complicated because it involved three governments in Edinburgh, London and Brussels. “It’s a big issue in Scotland but not south of the border,” he said. “The UK government has little interest in subsidising essential island ferry services.”
Last week the SNP MEP Alyn Smith took the dramatic step of urging the EC transport commissioner, Jacques Barrot, to go ahead and take the UK and Scottish governments to court in Luxembourg. Barrot is due to visit Scotland next month.
A court case would help to sort out the mess over the CalMac subsidies, Smith argued. “We are so far down the rabbit hole we need to blast ourselves out,” he told the Sunday Herald. “Then we’ll have clarity on what the commission is actually unhappy about.”
Smith pointed out that the problem had been inherited from the previous government. “Court action will cut through the years of commission letters to one party or another being used selectively to argue a particular agenda,” he said.
“Claim and counterclaim over what the rules mean and selective misinterpretation of the rules by various vested interests have produced a status quo that leaves nobody happy and the community and government stuck together in the middle of a swamp not of our making.”
Civil servants’ fear of CalMac becoming bankrupt - highly unlikely though that was - helped explain the policy paralysis, Smith suggested. “There is no way the commission would enforce such a consequence in the face of robust and high profile opposition from Scotland's government,” he added. “The fact is this will not go away until we face it down.”
The Scottish government said it couldn’t comment in detail on an ongoing legal case. The released database “details views from officials outlining the worst case scenario,” said a spokesman. “But there is no evidence to suggest that the EC will take this action.”
Download the entry from the Scottish government's database on the alleged breach of European law over CalMac subsidies here (12kb Excel).
Read a later story about the database - and download the entire document - here.