TravelWatch - Isle of Man Statement
in Response to Infrastructure Minister's Announcement in July 2015 Tynwald:
An Opportunity to Influence Future Sea Travel
TravelWatch welcomes the announcement, by Minister Phil Gawne, to undertake a public consultation exercise as part of the review of the long-term future of ferry services. These initial comments from TravelWatch are intended to promote public debate and to encourage passengers and freight interests to respond to the consultation.
To obtain maximum value from the consultation, the Government needs to not only clearly describe their three options , but also outline the merits and disadvantages of each option. There should be sufficient time for the public to consider and respond, using a structured format, so that a comprehensive Consultation Report can be produced and issued, prior to any political decisions.
Three Options were presented by the Minister:
1- Respect the current agreement whilst preparing to start a tender process in 2022, so that a potential new operator would be in a position to take over when the User Agreement expires in 2026.
This represents the ''do nothing now'' option, with the resulting possibility of ageing ships and declining service owing to the the uncertainty of outcome from competitive tendering against other ferry operators. Or would the Steam Packet remain ''on the ball'' in order to be invited to tender in 2022?
The competitive tender process in 2022 would necessarily be complex as the criteria for service requirements including quality and financial, together with assessment scoring details, would have to be specified clearly to tenderers. And what happens if none of the tenders received is acceptable? Any subsequent attempt to negotiate with a tenderer could give rise to legal challenge.
2 - Agree to a request from the Steam Packet to end the current User Agreement early and then go out to the market.
This represents the ''wait and see'' option, as the initiative would be with the Steam Packet to make such a request. How likely is this in view of the Steam Packet's outstanding debt and any intention to reduce or eliminate this during the remaining years of the User Agreement?
The Government would not be in control of the timing of the request, and a sufficient period of notice would be needed in order that the competitive tender process described above could be implemented.
The declining service noted for the ''do nothing now'' option would be a possibility.
3 -Invite the Steam Packet to propose a new agreement that offers such exceptional value to the Isle of Man that Tynwald can agree that it would be in the best interests of the Isle of Man to accept it without testing the market with a tender process.
This represents a ''do something'' option, requiring considerable input, sooner rather than later, by both the Government and the Steam Packet. Whilst negotiations with the Steam Packet could be challenging, they can be expected to be less complex or time-consuming than a formal competitive tender process.
If a new Agreement was reached, the Steam Packet would have the certainty to be able to plan investment for a long term future, together with an undertaking to provide improved overall service for users from an early date. And if no Agreement reached, then the Government would be free to reconsider its alternative options.
Expectations of Any New Agreement : Whether the result of a proposal from the Steam Packet, or from competitive tendering, TravelWatch would expect firm safeguards to be incorporated into a contractual Agreement, and is floating the following ideas and questions to stimulate debate.
Although the ferry service does not have a complete monopoly on traffic to and from the Island, it may be helpful to learn from how Regulated Monopolies operate elsewhere, such as UK privatised water companies. Should the Government establish a Regulator with teeth and who is publicly accountable? Might there be Government nominees on the ferry company board, or even the holding of one nominal ''Golden Share'' by the Government?
To promote efficiency, initiatives and to encourage growth, should fully transparent open-book accounting be considered? Should fares and charges be related to a margin on revenue (to encourage growth), and/or on a return on the real costs of ''capital'' assets employed? (This should not be based on the costs of servicing debt placed on ferry company by external owners.)
Also, TravelWatch would expect the Government to establish a formal User Group including representatives of passenger and freight customers
In any proposal from the Steam Packet, or from any competitive tender, in return for a guaranteed future, TravelWatch would expect to see them ''sharpen the financial pencil,'' and also to produce imaginative proposals incorporating lessons learned from best practice of ferry operators elsewhere. TravelWatch seeks emphasis on customer focus, on a more imaginative fare structure to encourage growth, such as highly discounted pricing initiatives to generate incremental revenue (as in the airline industry), and loyalty scheme, and no complicated small print.
There is clearly an opportunity for better sea travel: The completion of the Heysham to M6 link will eliminate the traffic delays through Lancaster, and increase the attractiveness of Heysham for freight and accompanied vehicles. An early Agreement between the Government and the Steam Packet could provide clarity regarding future vessels, and their operational requirements. Such clarity is needed for Liverpool services, where the Government and the Steam Packet are liaising with Peel Ports regarding a replacement river berth. It is essential that negotiations on behalf of Isle of Man interests are conducted robustly regarding the berth and facilities, to ensure cost-effective infrastructure suited to efficient ferry operations (ultimately paid for by ferry users). TravelWatch believes it is vital that any new Liverpool facilities are located close to the City Centre for the benefit and convenience of the significant foot passenger market.
TravelWatch urges ferry users, especially passengers, and all those concerned about the future of sea services to grasp this opportunity to join the debate, and to respond to the planned Government consultation.
August 2015
John Pennington
TravelWatch welcomes the announcement, by Minister Phil Gawne, to undertake a public consultation exercise as part of the review of the long-term future of ferry services. These initial comments from TravelWatch are intended to promote public debate and to encourage passengers and freight interests to respond to the consultation.
To obtain maximum value from the consultation, the Government needs to not only clearly describe their three options , but also outline the merits and disadvantages of each option. There should be sufficient time for the public to consider and respond, using a structured format, so that a comprehensive Consultation Report can be produced and issued, prior to any political decisions.
Three Options were presented by the Minister:
1- Respect the current agreement whilst preparing to start a tender process in 2022, so that a potential new operator would be in a position to take over when the User Agreement expires in 2026.
This represents the ''do nothing now'' option, with the resulting possibility of ageing ships and declining service owing to the the uncertainty of outcome from competitive tendering against other ferry operators. Or would the Steam Packet remain ''on the ball'' in order to be invited to tender in 2022?
The competitive tender process in 2022 would necessarily be complex as the criteria for service requirements including quality and financial, together with assessment scoring details, would have to be specified clearly to tenderers. And what happens if none of the tenders received is acceptable? Any subsequent attempt to negotiate with a tenderer could give rise to legal challenge.
2 - Agree to a request from the Steam Packet to end the current User Agreement early and then go out to the market.
This represents the ''wait and see'' option, as the initiative would be with the Steam Packet to make such a request. How likely is this in view of the Steam Packet's outstanding debt and any intention to reduce or eliminate this during the remaining years of the User Agreement?
The Government would not be in control of the timing of the request, and a sufficient period of notice would be needed in order that the competitive tender process described above could be implemented.
The declining service noted for the ''do nothing now'' option would be a possibility.
3 -Invite the Steam Packet to propose a new agreement that offers such exceptional value to the Isle of Man that Tynwald can agree that it would be in the best interests of the Isle of Man to accept it without testing the market with a tender process.
This represents a ''do something'' option, requiring considerable input, sooner rather than later, by both the Government and the Steam Packet. Whilst negotiations with the Steam Packet could be challenging, they can be expected to be less complex or time-consuming than a formal competitive tender process.
If a new Agreement was reached, the Steam Packet would have the certainty to be able to plan investment for a long term future, together with an undertaking to provide improved overall service for users from an early date. And if no Agreement reached, then the Government would be free to reconsider its alternative options.
Expectations of Any New Agreement : Whether the result of a proposal from the Steam Packet, or from competitive tendering, TravelWatch would expect firm safeguards to be incorporated into a contractual Agreement, and is floating the following ideas and questions to stimulate debate.
Although the ferry service does not have a complete monopoly on traffic to and from the Island, it may be helpful to learn from how Regulated Monopolies operate elsewhere, such as UK privatised water companies. Should the Government establish a Regulator with teeth and who is publicly accountable? Might there be Government nominees on the ferry company board, or even the holding of one nominal ''Golden Share'' by the Government?
To promote efficiency, initiatives and to encourage growth, should fully transparent open-book accounting be considered? Should fares and charges be related to a margin on revenue (to encourage growth), and/or on a return on the real costs of ''capital'' assets employed? (This should not be based on the costs of servicing debt placed on ferry company by external owners.)
Also, TravelWatch would expect the Government to establish a formal User Group including representatives of passenger and freight customers
In any proposal from the Steam Packet, or from any competitive tender, in return for a guaranteed future, TravelWatch would expect to see them ''sharpen the financial pencil,'' and also to produce imaginative proposals incorporating lessons learned from best practice of ferry operators elsewhere. TravelWatch seeks emphasis on customer focus, on a more imaginative fare structure to encourage growth, such as highly discounted pricing initiatives to generate incremental revenue (as in the airline industry), and loyalty scheme, and no complicated small print.
There is clearly an opportunity for better sea travel: The completion of the Heysham to M6 link will eliminate the traffic delays through Lancaster, and increase the attractiveness of Heysham for freight and accompanied vehicles. An early Agreement between the Government and the Steam Packet could provide clarity regarding future vessels, and their operational requirements. Such clarity is needed for Liverpool services, where the Government and the Steam Packet are liaising with Peel Ports regarding a replacement river berth. It is essential that negotiations on behalf of Isle of Man interests are conducted robustly regarding the berth and facilities, to ensure cost-effective infrastructure suited to efficient ferry operations (ultimately paid for by ferry users). TravelWatch believes it is vital that any new Liverpool facilities are located close to the City Centre for the benefit and convenience of the significant foot passenger market.
TravelWatch urges ferry users, especially passengers, and all those concerned about the future of sea services to grasp this opportunity to join the debate, and to respond to the planned Government consultation.
August 2015
John Pennington