Road Equivalent Tariff (RET)

What were the Scottish Government’s consultants asked to do in producing their proposals?

1) review approaches to fare-setting for public service ferries in other countries;

2) offer definitions of RET that could be applied to all categories of passenger and vehicular traffic in the context of ferry fares for the Clyde and Hebrides and Northern Isles routes which are subsidised by the Scottish Executive;

3) provide an initial analysis of the potential impact (especially in economic and social terms) of the introduction of an RET approach;

4) make recommendations on the design and implementation of a pilot study applying RET on one or more of the routes connecting the Scottish mainland and the Western Isles, including the choice of route(s), anticipated costs, start date, length of the pilot, operational constraints and any capacity constraints that may emerge; and

5) carry out any baseline information gathering in advance of the pilot that is considered necessary for subsequent monitoring and evaluation purposes.

How does RET work generally?

There are a number of variations on what RET could be. Road Equivalent Tariff (RET) usually involves setting ferry fares related to, but not necessarily equivalent to, the cost of travelling by road. Ferry fares have been seen by many as a barrier to economic growth on the islands. It is argued that lowering the fares to a level broadly similar to mainland traffic costs could act as a boost to island economies by reducing freight costs to local businesses, lowering the cost of living for island residents and making the islands more attractive to tourists.

Where and how is RET going to be applied in this scheme?

All three of the mainland to Outer Hebrides routes will feature in the pilot exercise, which has been developed by consultants on behalf of the Scottish Government: from Stornoway to Ullapool (52 miles), from Uig to Tarbert (29miles) and Uig to Lochmaddy (29 miles), from Oban to Castlebay and Lochboisdale (89 miles) and the service from Oban to Coll and Tiree (59.7 miles).

The two inter-island services operated by CalMac across the Sounds of Harris and Barra in the Outer Hebrides will not feature in the pilot. The fares for the inter-island legs (between Castlebay and Lochboisdale and Tarbert to Lochmaddy) will not be at RET rates but will be set at the same level as the fares on the Sounds of Barra and Harris. The length of each route to be used in the calculation of the RET fare has been determined by the consultants. CalMac will calculate the new fares on the basis of the information and data supplied by the consultant.

Why have other island areas not been included in the pilot scheme?

There are two reasons. Firstly, the SNP manifesto commitment was to introduce a pilot scheme for routes to and from the Outer Hebrides. Second is the matter of affordability. The finance available (£22.5million in 2008-9, 9-10, 10-11) has been approved in the recent Scottish Government Spending Review and Budget.

Why is a pilot study necessary? Can’t CalMac simply just reduce fares now?

The study is comprehensive. A wide range of issues have to be studied to be sure that the pilot scheme provides all the information needed to better inform decisions on future fares levels. The desk study element of the exercise to date has been very informative in providing advice on the best route or routes to choose for the pilot and how RET is used elsewhere. However, only a real live pilot study will show how island residents, tourists, businesses, the freight industry and local economies will react to a significant reduction in fares. This is very relevant to future planning.

How will the pilot work?

RAC and AA rates have been used by the consultants to determine the cost for car travel as they provided a better basis for the RET pilot scheme than the HMRC (Customs and Excise) rate of 40p per mile, given that rate has not been updated for some time. The figure of 60p per mile has been set. This will be applied to the routes involved, on a list of set distances determined by the consultants, with the addition of a core fare for cars of £5 per journey. It has also been determined that the total RET fare should, in no circumstances, exceed current lowest priced journeys in 2008. The RET pilot has been developed on the basis that it is affordable and within the budget provided for RET in the recent spending review.

Are cars, commercial vehicles and coaches all subject to RET in the pilot areas?

The basis on which the calculation of rates and the distances on which the scheme is based by the consultants will be published in their report on the pilot scheme shortly.

The RET rate for cars will be a core fare per journey of £5, with an additional distance rate of 60 pence per mile. For example, a car on a 50-mile journey would be charged £5+.60x50= £35. The RET rate for commercial vehicles, including light vans or pick-ups over 5m in length, will be charged on a lane metre per mile basis, with a core fare per journey of £20 for commercial vehicles added to a distance rate per lane metre of 18p per mile. They will also be subject to VAT. For example, a vehicle 15 metres long travelling on a 50-mile journey would be charged £20+.18x15x50= £155 (+VAT). Coaches in the pilot areas will be charged as commercial vehicles at the same rates, using their specific lengths and will be subject to VAT. The RET rate for passengers is delivered as a portion of the car rate and will be a core fare of £2 added to an RET rate of 10p per mile. For example, a passenger travelling on a 50-mile journey would be charged £2+.10x50=£7.

The RET rates were developed by the consultants on the basis that they would be affordable and represent a rate that could be applied if subsequently rolled-out across the network.

Is any distinction being made for the rates island residents and non-island residents will pay in the RET pilot?

No. The RET rates will be fair and transparent and available to everyone travelling at the published rates. They will also apply all year round.

On what basis have the mileage rates for passengers been set?

The consultants considered passenger rates on buses and trains to establish a consistent equivalent per mile rate. Experience elsewhere showed that a percentage of the car rate is used and the consultants have suggested that a core rate of £2 plus 10p per mile represents a fair percentage of the car rate.

How has the mileage figure been set for the journeys?

This has been set using a road equivalent mileage for the distances, rather than nautical miles. For the record, one road mile = 0.869 nautical miles; a nautical mile = 1.1508 road miles. The suggested rate of 60p also includes an uplift to cover the fares increase due on the routes included in the pilot in spring 2009.

On what basis have the mileage rates for commercial vehicles and buses been set?

The consultants considered Road Haulage Association and Freight Transport Association rates. The suggested rate reflects a cost of £20 plus £1.80 per mile for a 10 metre vehicle which is broadly comparable with the data provided by those organisations.

The current fare structure on the CHFS network is based on the length of the vehicle. It is clear there is a strong correlation between the length/weight of the vehicle and the cost per mile of running that vehicle. The consultants recommend that the fare per mile for CVs and buses continue to reflect the length of the vehicles carried on the vessels but also reflect the running cost of the vehicle. The new fare would then be a rate per metre per mile.

Will RET reduce the cost of transporting heavy goods to the islands and lead to a cheaper cost of living?

RET will apply to all categories of fares and will result in lower fares for commercial vehicles. It is for hauliers to decide how this saving and reduction in costs will be passed on.

What will happen to fares in areas not involved in the pilot scheme?

These will remain as published by CalMac and will be subject to annual increases in line with the conditions applying in the Clyde and Hebrides contract. The existing fares scheme, and all the current conditions, will continue in non-pilot areas. There will be no annual increase applied in the RET pilot areas in 2009. Thereafter, the RET fares will be subject to an annual increase, as will the fares in the rest of the network.

When and how will the pilot scheme be introduced?

The pilot exercise will start on 19 October 2008, which is the start of the CalMac winter timetable. This will allow CalMac time to prepare new ticketing systems and avoid the need for refunds. CalMac’s busiest time for bookings for the summer timetable is normally between January and March. An earlier start would potentially involve a large number of refunds due to customers who had booked at pre-RET rates. CalMac also needs to have time to prepare various logistical issues such as revised ticketing systems, information and promotional material.

How long will the pilot scheme last?

The pilot will run for 2½ years from Autumn 2008 to Spring 2011, to enable consideration of the wider impacts on the local economy in the Outer Hebrides and to establish the full potential benefits of introducing an RET system for all ferry fares in Scotland.

When will customers be able to purchase vehicle tickets and make reservations at the RET prices?

CalMac is currently working up the new fare tariffs and will publish these as soon as possible after the stakeholders meeting on 27 February. The CalMac reservations system for vehicles will be open for business from late August. From that point onwards, customers booking travel for vehicle journeys in the pilot areas will be able to make reservations at the RET rates, where applicable.

What will happen with regard to passenger tickets?

There are no plans to change the ticketing arrangements or validity of tickets for foot passengers. From October 19 the validity of single tickets will remain as being for the day of travel. The validity of return tickets will remain as being one month from the first date of travel. There are no plans to introduce an advance booking system for foot passengers. The pilot scheme will monitor any impact RET fares may have on travel patterns.

Will there be a refund system for tickets bought and not used?

All reservations for vehicles will be on a pre-paid basis, with payment due at the time of booking to ensure the reservation is made and delivered. A robust refunds policy will be in place and details will be published in due course.

What happens to current multi-journey tickets in the RET pilot area?

There will be no multi-journey ticket provision as the RET fares in the pilot area have been capped at a level which will not exceed the cheapest fare available through multi-journey tickets. Customers who have purchased multi-journey tickets before the scheme is introduced in the pilot area will have their tickets honoured for the specific journeys, but they will not be refunded.

How will the scheme affect the current and previously available discounts schemes in the pilot area?

With the exception of Scottish Government (National) and local authority funded concessions for senior citizens, the visually impaired and children, and the hauliers’ concession for using MV Mùirneag, the introduction of RET fares in the pilot areas will remove all other concessions, discounts and special arrangements currently operating on the routes.

How will the current and previously available discounts schemes in non pilot areas be affected?

All current discounts will remain in the non pilot areas as they are specified in the CHFS contract. How will tickets such as Rover and Hopscotch be affected? These will still be available, with a re-adjustment being made to allow for the implications of some routes being in the pilot area and others not being in it.

What charges will be applied to unaccompanied vehicles/CVs in the RET pilot area?

There is no change to current policy.

Will the RET fares increase in Spring 2009 in line with the general fares increase allowed in the Public Service Contract?

No. The initial RET fares have been set to cover anticipated fares rises in spring 2009 prices and will not rise until spring 2010.

What are the implications of the introduction of RET in the pilot area for the possibility of seven day sailings to Lewis and later sailings on Saturday nights?

This is now being examined in relation to the detail of the RET proposal which has only now become available. Decisions on the two issues will be made as soon as possible.

Why has the Scottish Government not just introduced the 40% discount scheme suggested by other political parties?

The suggested discount scheme would only have applied to passengers resident in the islands. As the discount would not have been available to businesses or tourists it would not have stimulated the economy or encouraged tourism in the way the Scottish Government’s RET scheme is likely to stimulate island economies. RET applies to all categories of travellers and will help to encourage tourism and to stimulate local economies.

The previous administration had already set aside funds for a discount scheme had they not?

There was never a budget for any such scheme. These were Labour and Lib Dem party manifesto proposals.

What happens after the pilot finishes in 2011?

The consultants working on the scheme for the Scottish Government have been asked to monitor the operation of the pilot and, once it is finished, provide an evaluation of the exercise. This will allow decisions to be taken on future ferry fares in Scotland. A report on options for the scheme will be the main output of the first phase of the study. This will be published soon.

The second phase of the study will involve the monitoring of the pilot study, including the gathering of traffic statistics and information from, for example, ferry users and local employers (including the freight and tourist sectors) designed to allow the impact of the pilot (especially in economic and social terms) to be assessed.

The third phase of the study will involve an evaluation of the pilot, making use of the information gathered through the baseline and monitoring exercises. In addition to assessing the impact of the pilot, the evaluation should attempt, as far as is possible, to quantify both the costs and benefits which would arise should RET be applied on a permanent basis and rolled out to other ferry routes in the Clyde and Hebrides and Northern Isles networks and the likely longer-term impacts of such a roll out. This stage should seek to identify any capacity constraints that would emerge from a permanent roll out and quantify the cost of increasing the capacity to meet demand.

What finance has been made available for the RET scheme?

The Scottish Government has allowed for £22.5million over the next three years to pay for RET in the pilot areas. CalMac will continue to update this information as and when new material becomes available.

What happens to coach passengers? How are they charged under RET? How are the coach drivers dealt with?

Under the RET pilot charges, passengers are charged separately and pay individual passenger rates. The drivers cost is included in the rate for the vehicle.

Last update: Friday February 29, 1000hrs