On 18 October 2021, the House of Lords is due to debate a motion about ferry crossings between the Isle of Wight and the mainland. The motion, tabled by Lord Berkeley (Labour), concerns the Competition Act 1998 (Coronavirus) (Public Policy Exclusions) (Revocations) Order 2021. It reads:
[T]hat 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.
If agreed, the motion would formally signal that the House has reservations about the instrument for the reasons stated. However, it would not stop the order from having legal effect.
What does the statutory instrument do?
The purpose of the instrument is to undo the suspension of certain elements of competition law that the Government brought in to aid the response to the coronavirus pandemic. The Competition Act 1998 (Coronavirus) (Public Policy Exclusions) (Revocations) Order 2021 revokes four orders which enabled competing enterprises to share information to reduce disruption in the supply of goods and services.
One of the orders revoked by the instrument concerns ferry services operating on the Solent, between the Isle of Wight and the mainland. In March 2020, the Government announced that ferry services to and from the Isle of Wight were at significant risk of disruption. The coronavirus pandemic had led to reduced passenger numbers, and the Government predicted that high levels of staff absence because of illness or self-isolation could affect services. It therefore made the Competition Act 1998 (Solent Maritime Crossings) (Coronavirus) (Public Policy Exclusion) Order 2020. This allowed the two ferry operators to share information and staff to ensure that ferries continued to run regularly across the Solent.
The Government has decided that this suspension of competition law is no longer needed as, it argues, there is no longer a threat of severe disruption. The instrument revoking the suspension was subject to the made negative procedure and became law as neither House objected within the set time period. It came into force on 29 July 2021.
Are Isle of Wight ferry services competitive enough?
Some people have argued that there is insufficient competition between ferry services, resulting in high fares for people who live on the island. There are two companies that run ferry services to and from the Isle of Wight, and one company that operates a hovercraft service. In a House of Commons debate in 2014, the then MP for the Isle of Wight, Andrew Turner (Conservative), said “the two main operators each have an effective geographical monopoly on their own routes”. A 2018 petition submitted to the Government and House of Commons Petitions Committee, which gained 17,654 signatures, argued that because prices are unregulated, ferry companies “are permitted to charge whatever they wish for crossings”.
Mr Turner and his successor, Bob Seely (Conservative), have both argued that the sale of the two ferry companies to large financial institutions has been detrimental to passengers. Mr Turner said that the buyers “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”. Mr Seely has said that “many issues that relate to the ownership of the two ferry companies are not necessarily in the public interest and help to sustain the very high fares that islanders are forced to pay”.
In a 2009 market report on Solent ferry crossings, the former Office of Fair Trading (OFT) found that competition appeared to be limited and there were high barriers to new firms entering the market. However, the OFT found that average prices were broadly in line with other commercial ferry services in Europe. It also found that services were “comprehensive”, with frequent crossings and fairly good reliability. The OFT decided not to refer the issue to the then Competition Commission (the functions of which have now been transferred to the Competition and Markets Authority) because it had “not seen sufficient evidence of consumer detriment”.
Both the OFT and Mr Turner highlighted that “yield management pricing”, in which fares can be significantly cheaper at times when there is less demand, can disadvantage island residents. Mr Turner said that tourists can often benefit from these fares, while islanders who need to travel at specific times to get to work or other appointments cannot be so flexible. The OFT said that while it could be argued that yield management pricing was not appropriate for a ‘lifeline’ service such as the Solent ferries, this was not indicative of competition problems.
The Government has since said it does not think it is necessary to regulate ferry services across the Solent. In response to the 2018 petition, the Government said that “there is no evidence of market failure to require regulatory intervention”. The Government highlighted differences between the Isle of Wight and the Scottish islands for which the Scottish Government subsidises and regulates ferry fares. The Government said that these Scottish islands are “lightly populated” and commercial ferry services serving them would not be viable. It argued that this is not the case for the Isle of Wight.
Should the Government impose a public service obligation on the ferry companies?
A public service obligation allows governments to intervene in the running of transport routes that “cannot be run commercially”. It is a concept from EU law. Governments can do this by awarding a route to one provider and compensating them for losses, or by setting rules for how the transport is run.
Mr Seely has argued that the Government should impose, or devolve the power to impose, a public service obligation on the Solent ferry companies. In a House of Commons debate held in 2018, Mr Seely argued that the fact that the ferries were privatised with no public service obligation was “a significant and pretty unique error”. He said that such an obligation should now be imposed and that its costs would be covered by the ferry companies’ “inflated profits”. Rishi Sunak, then a Parliamentary Under Secretary of State for Housing, Communities and Local Government and responding on behalf of the Government, did not respond to this point.
The Government has recently reiterated that it does not intend to impose a public service obligation for Solent ferry companies. On 9 September 2021, Mr Seely asked Parliamentary Under Secretary of State for Transport Robert Courts what assessment the Department for Transport had made of imposing a public service obligation on transport services between the Isle of Wight and the mainland. The minister replied that “service provision to the island is a matter for the local council, working with service operators” but that “the Government will continue to monitor the service on this route”.
Isle of Wight Council’s transport lead, councillor Phil Jordan, refuted the idea that a public service obligation was a matter for the local council. He was quoted in the local press saying:
If it were in our powers, we would have been talking to the ferry companies along those lines a very, very long time ago. This is absolutely a matter for the Government. It is not a matter the council can deal with without the assistance and regulatory powers of government.
On 8 October 2021, a local news website reported that an Isle of Wight-based consortium is taking initial steps to open a third ferry route between the island and the mainland. The news story reported comments by Mr Seely. These comments included that the introduction of a third vehicle route would hopefully improve services and drive down prices, and that he was working with those involved to access government funding and private investment.
Image by Pablo Valerio from Pixabay.