A FERRY PECULIAR PRACTICE

Last Updated on Friday, 26 February 2010 12:59 Written by Aileen MacNicol Thursday, 25 February 2010 16:15

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THE two ferry companies plying their trade on the contentious Dunoon - Gourock route became involved in a fresh dispute last week as Western Ferries made an official complaint about CalMac’s figures.

 

Following close in the wake of the cut-off date for submissions of interest in tendering for the service, the issue has meant that relations between the companies are at a new low - with CalMac indicating that it is considering legal action over Western’s allegations.
Gordon Ross, managing director of Western Ferries, wrote to Audit Scotland last week. The basis of his complaint was that last year’s European Commission investigation into ferry services had highlighted deficiencies in CalMac’s preparation of accounts relating to the commerciality of the vehicle-carrying aspects of the Dunoon-Gourock route.
Mr Ross is understood to suspect that the subsidy paid to CalMac for carrying passengers (£3.1 million according to the latest CalMac accounts) is used to cross-subsidise the vehicle service.
He told the Standard: “The Scottish administration gave guidance to CalMac in 1995 indicating that it should provide separate accounts for any commercial activity outside the passenger-only service.
“Why has this not been done? This is the essence of my complaint.”
Asked about the timing of his complaint, Mr Ross replied: “The EU report is what’s new. We only got access to the full report in December and the basis of our complaint relates to the content of that report. Only when we saw that could we proceed.”
When it was pointed out that the report had been available for several weeks before Western’s mid-February complaint, he responded: “There has been a lot going on and these things take time - it was important to read and interpret the report first.”
A CalMac spokesman dismissed the complaint as “absolute nonsense” and indicated that the company is seriously considering legal action.
"We are puzzled as to what Mr Ross thinks he will achieve with this latest clumsy attempt at mischief-making,” he said.
"It is of course absolute nonsense to suggest our accounts are anything other than fully compliant with established accountancy procedures. 
“They have been independently audited at various times by top accountancy firms KPMG and PWC, plus Audit Scotland themselves, all of whom gave them a clean bill of health.
"The EU investigation to which Mr Ross refers was into government state aid to ferry services, not CalMac, and, contrary to his claim, the EU has not raised any issues with us whatsoever about our accountancy procedures. 
“It is also  well known that the investigation concluded that the subsidies were fully compliant with state aid rules, the only outstanding issue being the tendering of the Dunoon-Gourock route which is now underway.
"In addition, the information related to the Dunoon-Gourock service which he somewhat bizarrely claims we have not made available, was provided to the Scottish government  for its submission to the EU and is in the public domain.
"However, should Audit Scotland wish to revisit our accounts, and review its earlier findings, we are of course happy to provide whatever assistance is required.”
He concluded: "In the meantime, we will be taking advice on these damaging and unfounded allegations which question the integrity of CalMac, its board and auditors, to see if legal proceedings are appropriate."
Asked for his views on the CalMac assertion that his complaint was little more than mischief-making, Mr Ross told the Standard: “Absolutely not.
“This is a serious issue. It is about ensuring that taxpayers’ money is not being used to support a commercial service.”
The tender issue is not the only interesting background element to the latest development in the Dunoon-Gourock ferry saga. The Western complaint comes just two weeks after the private ferry operator published its own accounts for last year.
These show a considerable downturn in profits for Western - £952,000 this year compared to £1.64 million last year, a drop of 42 per cent.
However, a potentially more pressing concern is the fact that Western remains in dispute with HM Revenue and Customs over its tax liability. And its latest accounts indicate that it may have to pay out £2.55 million plus interest if a special hearing later this year decides that the company should be paying corporation tax and not the much lower rate of tonnage tax (which costs Western just £1,000 a year).
The tax issue threatened to scupper Western’s participation in the ongoing tender process for Dunoon-Gourock, when tender documents stated that bidders must have fulfilled all tax obligations.
But Mr Ross has maintained that the company has met its requirements and that the HMRC challenge will present no barrier to tendering for the route. He has also said that, if the special hearing decides in HMRC’s favour, the company is able to withstand such a bill.
When asked to comment on the latest complaint against the backdrop of Western’s ongoing tax dispute with HMRC, Mr Ross said simply: “It’s a completely separate issue.”
Local campaigner and acknowledged expert on the economics of ferry services, Professor Neil Kay, told the Standard: “If indeed the CalMac subsidy is excessive, this simply reflects the efforts of governments over the years to restrict the frequency of the public service and its ability to deploy modern vessels.
“These actions were taken by various governments to protect Western’s market.”

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