Competition Act 1998 (Coronavirus) (Public Policy Exclusions) (Revocations) Order 2021

Lord Berkeley Excerpts

Monday 1st November 2021 Lords Chamber

Moved by

[Lord Berkeley]

To move that this House regrets that the Competition Act 1998 (Coronavirus) (Public Policy Exclusions) (Revocations) Order 2021 (SI 2021/773), in respect of the Competition Act 1998 (Solent Maritime Crossings) (Coronavirus) (Public Policy Exclusion) Order 2020, (1) removes any COVID-19 related collaboration for lifeline services on the Solent ferry routes, (2) does not provide a greater incentive for operators to compete to the benefit of passengers and freight customers, and (3) does not provide a continuing overview of competition issues by the Competition Commission on these routes.

Relevant document: 9th Report from the Secondary Legislation Scrutiny Committee

[Lord Berkeley (Lab)]

My Lords, I decided to put down this Motion to Regret because it provides an opportunity for us to discuss the role of competition in ferry services. Does it incentivise operators to compete? Can they compete? Is there a role for the competition commission or some other body, because there is also a problem of a lack of transparency? This regulation relates to the competition exclusion for the Isle of Wight ferries during the Covid epidemic. That has now been, quite rightly, removed, but many of us can wonder what the difference is between when the regulation was in force and now, when it is not. I want to address my remarks both to the Isle of Wight services and to the Isles of Scilly services, and I declare an interest, as I live there.

The ferries kept going during the Covid-19 restrictions, thanks to grants from the Government to make up for the lack of passengers. I think they are all very grateful for that. For the ferry routes to these two islands, the total grant was about £10 million, but we do not know which company received it and what it did with it. They were not allowed to compete with each other on the Isle of Wight, while they now are, but I again question what changes have occurred since they were allowed to compete. Does competition, therefore, work in the ferry sector to give customers, passengers and freight a reasonable service at affordable prices? It is quite important for the people who live on these islands. Do they ever really compete, or is something else required to look after the customers’ interests?

We do not know whether the companies make excessive profits, but there is quite a lot of evidence that some of them fail in providing lifeline services for those who need urgent transport, particularly for the NHS. It is true to say that successive Governments have recognised the particular difficulties caused to both businesses and social services, as well as to education services, by barriers imposed on these communities. It is not, perhaps, surprising that schools on the Isle of Wight have long been at the bottom of the league table, with Ofsted constantly imploring improvements. There is no reason why it should be that way, but apparently it is.

Councillor Phil Jordan, who is the Cabinet member for transport on the Isle of Wight Council, has said:

“We have great concerns over the transparency of the operational factors of ferry companies that, in turn, lead to commercial decisions that take little account of the lifeline service the ferry operators provide, or the human cost involved with such commercial decisions.”


There is a lot of evidence that patients going to the mainland for NHS treatment, such as cancer intervention, are given absolutely no priority on some ferries. Quite apart from the costs involved, there is evidence that patients returning from NHS treatment—anaesthetics or invasive cancer treatment, I am told—are not given priority to board ferries. Sometimes, they are refused travel or sent to a later ferry. In other words, as they say colloquially, the sick are being bumped from travel.

The local MP, Bob Seely, has voiced support for a public service order, and the Isle of Wight Council has committed in its corporate plan to achieving a public service order on the Solent ferry operators. We do not know much; perhaps the Minister can tell us where that has got to.

It is the same for the Isles of Scilly. It is a very infrequent ferry service. Loading and baggage handling are, frankly, Victorian. There is no passenger shelter and freight charges are double those of the Scottish equivalent, which are already pretty high. It is good that the council has been awarded £48 million in a levelling-up fund announced by the Chancellor last week for two ferries between Penzance and St Mary’s. The trouble is that this is intended to perpetuate the inefficient, bad services, when they could be run with one ro-ro ship costing half that, about £22 million. I have told them that. The taxpayer is wasting about £19 million. When he responds, can the Minister tell me whether the Government required the council to seek competitive quotes for the new ship and services or ownership of these vessels? Is he happy that this £48 million will perpetuate what I think is an inefficient and expensive monopoly, to the detriment of the islanders—forget about the company?

We have two monopolies to the Isle of Wight and one to Scilly, providing what the Government seem to agree are lifeline services. There is not much monitoring going on as to whether these are effective. You have to ask what customers can do when these services are seen to be failing. You can ask the carrier, but it will say that it is not interested. You can ask the Department for Transport—we do not have a Transport Minister responding tonight, so let us say the Government—which will say that these are commercial services that they cannot influence. Customers may then ask what the remedies are if companies are seen to fail. After all, rail services are tightly controlled, as are many bus services, and there is generally competition for air travel in most places. Where is the community bit? What about affordability, service quality and frequency, for the NHS and other emergency services?

I will give the House a couple of examples. In Scotland, something called a road equivalent tariff is generally applied on fares and charges. To Islay, this is 29 pence per mile, while to Scilly it is £1.62 per mile, which is five times higher. For the Isle of Wight, on the Southampton to Cowes route, it is 96 pence per mile, which is three times higher. The train fares in the UK are very similar, between 10 pence and 30 pence per mile. As I said, the freight charges to Scilly are double those to Islay. This is not good for the economy. Unlike rail, the ferry fares are not regulated. There is no transparency about the ferry company costs, what might be a reasonable profit or the use of the Covid-related grant. What can people do? Should they ask the carrier or the department?

It is interesting that, over 10 years ago now in 2009, the OFT undertook a market study into the Isle of Wight services and the lack of transparency of their operations. Three operators wrote to the OFT offering increased transparency. One of them, Red Funnel, offered to publish clear information on performance, price per passenger, costs, capacity utilisation, customer satisfaction, reliability, punctuality and market growth. In spite of these commitments, which you might call solemn and binding, 12 years later, none of this has been done by Red Funnel or any of the other operators.

The same applies for the Isles of Scilly. It is a monopoly and there is no such information. There seems to be no pressure on operators to reduce costs or improve services. Where does the pressure come from? It could come from competition or from a government agency. After all, the Government control rail fares.

I do not think that the competition on the Isle of Wight works properly and, as I said, on the Isles of Scilly, the council has refused to commit to put the operations in the levelling-up fund bid out to competitive tender. Why? This failure of competition and governance is clearly having an adverse effect on the economy. Scotland recognises this, but in England I think the Government hope it is all going to go away.

I would like to hear the Minister’s response to the proposal that there needs to be some kind of regulatory oversight to make sure that the companies behave and provide the lifeline services to which they have committed themselves. It is a light touch role but could be done. We have the Office of Rail and Road for the railways and part of the road network; perhaps the remit of that could be expanded to cover ferry services. Maybe it is time for the CMA to be given a remit to examine these issues afresh and, most importantly, keep them under regular surveillance. In conclusion, I believe that some urgent action is required to make competition work for the benefit of consumers. I beg to move.

[Baroness Randerson (LD)]

My Lords, I start by thanking the noble Lord, Lord Berkeley, for tabling this Motion to Regret. I agree with almost everything he said. Of course, there are contrasting models in operation for ferry services around the UK, from market-based models to very much more subsidised models. Those complaining about the Solent services often look to other services for comparison, but the problem is that no two islands are really the same. People are searching for a model which provides the guarantee of service that the isolation of many UK islands requires but also an incentive for efficiency.

To look at a comparison of the islands, let us take Lewis off the west coast of Scotland as an example. Lewis is 130 miles off the mainland. It is about 350 miles from Edinburgh and about 600 miles from London. In contrast, the Isle of Wight is only 14 miles from Portsmouth and there is a ferry service which takes only 45 minutes. There is no regular air service, but there does not need to be one because of the short distances. The Isles of Scilly, whose service I know relatively well, are 35 miles off the coast. There is a sea crossing which is only for those with strong nerves and a strong stomach. It takes nearly three hours on what is a very elderly boat. I was therefore delighted to hear that there is funding to help deal with this situation. In reality, people go backwards and forwards to the Isle of Wight on a daily basis as commuters. You are not a daily commuter on a regular basis on the “Scillonian”, but of course people do go back and forth in a day to take up medical appointments. The vast majority of medical services are provided on the mainland.

We need a nuanced approach. Even in good times, islanders in general across the UK complain about their connectivity. There is, and rightly so, an emphasis on the importance of lifeline services. The SI to which this Motion to Regret relates suspended some elements of the Competition Act in relation to the Solent ferry services. There are three companies involved—one hovercraft service and two ferry services—so there is an element of competition. However, of course, during the pandemic they were apparently down to 10% of the normal passenger numbers and obviously it was not commercially viable. Yet it was obvious that essential services had to continue—freight as well as lifeline services—in terms of life-saving services.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I thank all those who have contributed to the debate. I especially thank the noble Lord, Lord Bassam, who came along to discuss the subject I thought we were coming here to debate: the revocation of the SI.

As I listened to the speeches of the noble Lord, Lord Berkeley, and the noble Baroness, Lady Randerson, I thought there was a sense of déjà vu about them, and of course there was. Perhaps the noble Lord and the noble Baroness will remember that we actually discussed this subject in 2017, when I had the privilege of being a transport Minister: we had a take note debate on remote island communities in England. I hope the noble Lord refreshed his speech before he made it again; I have not looked it up to see whether he has made the same one. So we have been here before and discussed the topic, and I gently suggest to the noble Lord that if he wants to have a debate about ferry services and their role in transport policy, perhaps he might want to go through the channels that would secure that properly rather than trying to shoehorn it into a debate on competition policy and the revocation of a particular SI. I will be very happy to explain to him the subject of his regret Motion—that is, why we revoked the SI. If other noble Lords are not interested in that, at least the noble Lord, Lord Bassam, will be.

I thank the noble Lord, Lord Teverson, for his concern for my welfare and my brief. I can tell the noble Lord that I will be travelling up to COP. In fact, I suppose I should be grateful to the noble Lord, Lord Berkeley, for detaining me in the House today; looking at some of the transport issues that have occurred to people travelling up to COP in the last two days, maybe I was better off staying here after all. I will be going for the buildings day next week.

To respond to the subject of the debate—I will come to some of the points made by the noble Lord, Lord Berkeley, later—last year, in response to the unprecedented challenge posed by the coronavirus pandemic, the Government responded with unprecedented rapidity to support businesses and people, and to enable a co-ordinated response to coronavirus. As part of the Government’s action, six public policy exclusion orders were made. These orders were intended to disapply elements of UK competition law temporarily in order to help businesses co-ordinate specific activities in certain sectors, and to support lifeline services during a period of disruption related to coronavirus. The Solent maritime crossings order was one such measure.

As the noble Lord is no doubt aware, more than 140,000 people live on the Isle of Wight. Residents rely on essential lifeline services to get access to medical supplies and essential healthcare or to facilitate the journeys of NHS staff, emergency services and other key workers. These services are all supported by ferry operators—I think there are currently three—without which residents would be isolated and with limited resources.

In response to the outbreak, and at the request of the local MP, the Government acted swiftly and suspended competition law temporarily for the Solent ferry operators to ensure that they could co-operate to continue to provide essential transportation despite the effects of lockdown. The order permitted three kinds of agreements between the Solent crossing operators to co-ordinate during the period of disruption: the use of timetables, the routes operated by any Solent operator, and the deployment of labour or facilities.

Of course, such measures are usually prohibited by competition law as in normal times co-ordination of this sort can lead to higher prices, less choice and lower quality of service for consumers. However, given the exceptional circumstances, it was not clear that any of the companies would be able to maintain a service without co-operation, and that therefore, without this order, lifeline services may well have ceased. The measure was therefore an important part of a wider support package to safeguard the vital transport links to the mainland.

In response to the questions from the noble Lord, Lord Berkeley, and the noble Baroness, Lady Randerson, I can tell the House that the Government also made available £22.4 million-worth of funding for the Isle of Wight and the Isles of Scilly between April 2020 and April 2021.

Operating together, the Solent maritime crossings order and the financial support scheme enabled the maintenance of lifeline connections to the Isle of Wight. Key services were retained despite temporarily not being economical to run. The Solent ferry operators were altogether able to transport passengers and passenger vehicles representing nearly 50% and 64% of their pre-pandemic baseline. They also saw an increase of 23% in the transportation of commercial vehicles. Without the temporary suspension of competition law and the funding provided, services would likely have stopped running, thus creating significant issues for islanders during the pandemic.

Under the Competition Act, exclusion orders may be applied only to situations where there are exceptional and compelling reasons of public policy. The Solent maritime crossings order was intended to address the effects of coronavirus on the Isle of Wight’s transport system. We were clear when making the order that it would remain in place only until the Secretary of State determined that there was no longer a significant disruption or a threat of significant disruption to the operation of Solent crossings.

I reassure the noble Lord, Lord Bassam, that the Government’s decision to revoke the order was made following consultation with the Isle of Wight Council and the ferry operators and with the confidence that the ferry operators were financially secure enough to return to normal services. The response strategy reopened the economy and, with the lifting of restrictions and the vaccine deployment, measures such as the Solent maritime crossings order became unnecessary.

The noble Lord, Lord Berkeley, also asked why the revocations SI does not provide a continuing review of competition issues by the Competition and Markets Authority on these routes. The CMA, as the UK’s independent competition authority, continues to be responsible for monitoring markets and enforcing competition law across the economy. Now that the Solent ferry crossings are back under competition law, they are indeed back under the auspices of the CMA. The CMA has significant powers and expertise to investigate markets and anti-competitive behaviour and to take remedial action where necessary. Complaints of anti-competitive behaviour can be made directly to the CMA. As the noble Lord knows, the Government do not determine which cases the CMA decides to act on.

I will add a note about the wider use of competition law exclusion orders. They have proven to be an effective instrument to provide a safety net—and at times more considerable security and support—to industries which need to collaborate in order to address exceptional circumstances. However, it is not a power that should be or can be used without careful consideration. The Government have recently made use of the instrument again. We temporarily exempted companies operating in the oil industry from the Competition Act for the purpose of sharing information and optimising fuel supply in the event of disruption. Earlier this month, the Secretary of State also announced a temporary exemption for parts of the CO₂ industry to help provide further security of CO₂ supplies and businesses. Finally, we have agreed to make an exclusion order for Premier League broadcasting rights to provide stability for the football pyramid, including for grass-roots football, women’s football and lower league clubs.

In each case, the use of exclusion orders was a proportionate and limited measure informed by the Government’s engagement with industry and intended to give companies a bit of breathing space to resolve the wider issues. However, we should be clear that business practices that undermine or restrict competition in markets are a threat to consumer interests, productivity and the wider economy. Suspending competition law longer than necessary could be harmful to consumers and to the economy and the Government will continue to use such measures only where necessary and appropriate.

The Solent maritime crossings order and all the other public policy exclusion orders revoked in July fulfilled their purpose. That there is no longer a need for this order is a testament to the success of the road map and the effectiveness of the Government’s response to Covid-19.

[Lord Berkeley (Lab)]

My Lords, I am very grateful to all noble Lords who have taken part in this short debate—the noble Baroness, Lady Randerson, the noble Lord, Lord Teverson, and my noble friend Lord Bassam—and of course to the Minister for his response. I do not regret tabling this Motion because, as the Minister said, it is four years since we last debated the order and quite a few things have happened since then, including Covid. I certainly want to put on the record the thanks of people I have spoken to on both islands for the grant the Government gave to keep the services going during Covid—otherwise they would have stopped; they had very little income because there were no passengers.

The noble Lord, Lord Teverson, mentioned that the Covid problems are still here and asked whether it was too soon. I can inform him that twice in the last six months there has been a week’s shortage of meat for people to eat on the Isles of Scilly. Whether that is due to Covid, transport or whatever we can debate.

I agree with the Minister that it is time to have this particular order withdrawn, but the concerns of residents and businesses on these islands will not go away. It is something that will need further thought, but it is good to know that the competition is still around, and that we can talk to the CMA if we want to and see where it goes. Again, I am very grateful to all noble Lords who have spoken in this very short debate and beg leave to withdraw my motion.

Motion withdrawn.