John’s Debate on Delivery Surcharges to Highlands & Islands

On Thursday  (24th September) John led a Member’s Debate on Citizens Advice Scotland’s report into delivery surcharges to the Highlands and Islands. You can read the motion, John’s speech and the reply from the Minister for the Islands below.

You can read Citizens Advice Scotland’s report: http://www.cas.org.uk/system/files/publications/the_postcode_penalty_-_the_distance_travelled.pdf

Motion debated: That the Parliament welcomes the publication of Citizens Advice Scotland’s report, The Postcode Penalty: The Distance Travelled; notes with concern the continuing problems highlighted in the report relating to the delivery of online shopping to people in the Highlands and Islands; understands that, while fewer online retailers now impose a surcharge for delivery, those who do have increased these charges by 17.6% for customers in the Highlands and 15.8% for island residents since 2012; welcomes the report’s recommendations, including extending the road equivalent tariff to cover delivery vehicles on ferries and the proposal to encourage delivery to ferries in partnership with CalMac, and notes calls for the Scottish Government to continue to work with Citizens Advice Scotland, trading standards services, the online retail industry and enterprise bodies to support innovation in the interests of consumers.

 

John Finnie (Highlands and Islands) (Ind):

“I thank the members who signed the motion and I congratulate Citizens Advice Scotland on its fine report, “The Postcode Penalty: The Distance Travelled—Progress on parcel deliveries in Scotland 2012-2015”. The report’s authors are David Moyes and Kate Morrison. The report is the most recent in a long-running campaign, which started in 2010 and involved Skye & Lochalsh Citizens Advice Bureau. There was a further report in 2012 from Sarah Beattie-Smith, whom many members know.

The problem of high delivery surcharges for consumers in remote and rural areas has not gone away. Businesses are affected, too: some 15,000 businesses in remote and rural areas are at a competitive disadvantage because of the problem, as well as being disadvantaged by geography, connectivity issues and fuel costs.

The CAS report says that the problems continue to impact on the Scottish Highlands and Islands. Indeed, it seems that the Highlands and Islands extend as far south as Stonehaven, Perth and Helensburgh. Wonderful locations though they are, they are in neither the Gàidhealtachd nor the northern isles, so there seems to be a lack of geographical knowledge in that regard. Perhaps it has something to do with postcodes.

Some things are better than they were three years ago, but we started from a very low threshold and, as the report says, high delivery cost

“is a problem that is getting more pronounced.”

Almost 50 per cent of retailers were applying surcharges in 2012; that is now down to 44 per cent. As ever, the islands are disproportionately impacted, with 62 per cent of retailers surcharging in 2012 and 53 per cent surcharging now. The percentages might have gone down, but customers who are surcharged are paying more, despite average delivery charges remaining static and falling in real terms. Highlands and Islands customers are paying roughly four times as much for delivery.

Overall, the position is slightly better than it was, but it remains disappointing. The report tells us what we all know, which is that the United Kingdom online shopping market is one of the most developed in the world, accounting for 15 per cent of total retail sales. That is important, because the market gives people in remote and rural areas the same levels of choice of goods as people in population centres enjoy. However, people in remote and rural areas are often excluded from a range of delivery options and face higher delivery charges to such an extent that online shopping is uneconomical for them.

Rural living presents many challenges. The report mentions research that indicated that

“rural household budgets need to be 10-40% higher in order to achieve a minimum acceptable living standard.”

Legislative compliance is all the more important against such a punitive background. More than a third of internet sites give customers less than the statutory notice period in which to return items, and some retailers have failed to update their terms and conditions to include the consumer contracts regulations. Robust enforcement is required.

Members might be aware of the “Statement of principles for parcel deliveries”. That is a grand title. The statement came into effect in 2014 and should have had a positive effect. However, only four of the 449 businesses that were surveyed for the CAS report knew about it, which is shocking. That is simply not good enough.

The challenge is not just for domestic customers. We want to encourage everyone to use their local businesses, which also face delivery problems and must pass on additional charges.

Citizens Advice Scotland not only highlighted problems but suggested solutions. In the limited time that I have, I will focus on some of those solutions, and I hope that the Minister for Transport and Islands will be able to respond to them. CAS recommends that the Scottish Government considers extending to vehicles that are more than 6m in length the road equivalent tariff fare structure in order to help to reduce the cost of delivering goods to islands. I appreciate the complexity around that, but as we heard in the report,

“I am as cheap to buy a [ferry] ticket and drive as R.E.T. is cheaper than using a carrier”.

That came from a Western Isles business owner.

There are opportunities focused around the “final mile consolidation”, as it is referred to.

Liam McArthur (Orkney Islands) (LD):

“John Finnie referred to an extension to the road equivalent tariff. It will not surprise him that those of us who represent islands that do not benefit from the road equivalent tariff would argue strongly for such an extension to benefit smaller businesses in Orkney and Shetland. Does he agree?

John Finnie:

“I agree absolutely, because I also represent the Orkney Islands. That is why I said that I appreciate the complexity of the situation and its financial implications.

We know from the report and the research that islands are more willing to engage in delivery solutions. That could mean collection from the local post office, which could have the knock-on effect of adding to sustainability, as could delivery to ferries and collection from island-side ferry ports. We are in the unique position of having Caledonian MacBrayne, so I hope that the minister will take the issues on board. There will always be challenges and the competitiveness of delivery costs and speed will be part of that.

The report also recommends that the

“Scottish Government considers how the public sector can work with the industry to encourage final mile consolidation in order to reduce delivery costs for Scottish rural consumers.”

Again, it would be helpful to get some feedback on that.

The report uses the term “logistical innovation”, which would give the opportunity to benefit a range of people.

In the short time that is left to me, I will comment on Royal Mail and the suggestion that there is the option of extending or enhancing the universal service obligation, and that it could cover new products. The report says:

“The growing importance of parcel deliveries to businesses and consumers adds another reason to value and preserve the universal service.”

That is important because of the downturn and changes in the level of use of letters.

CAS is doing a lot of good work, including collaborating at United Kingdom level, and I recommend that the minister pick that up. Aspects of the subject are reserved, but the minister has the opportunity to engage on the issues, not least on extending the definition of universal service obligation to cover more of the parcels market. I would appreciate it if the minister could pick up on the Scottish Government elements of that and confirm that he would be willing to work with the UK Government on the other matters.

The report is excellent and well-evidenced, and we all want to support the innovation that it outlines. It presents opportunities for retailers and customers and, if we do this right, for the planet.”

Reply from the Minister for Transport and Islands (Derek Mackay):

I, too, congratulate John Finnie on securing this debate. My colleague Fergus Ewing, the Minister for Business, Energy and Tourism, has taken a close interest in this issue for many years and he is disappointed that he cannot be here for this debate. He, of course, would have taken the lead on this issue, but as minister with responsibility for islands and transport issues, I, too, have a clear interest in the matter.

Over the summer, I visited a number of islands and heard about the challenges facing island living, of which this issue is one. There are actions that the Scottish Government and, indeed, the UK Government can take. I agreed with a lot of what Lewis Macdonald said, but I found his unnecessary and ill-informed scaremongering on the ferry contract most unhelpful and inaccurate.

Lewis Macdonald:

Will the minister give way?

Derek Mackay:

Well, I think that you reap what you sow. I should not take an intervention, but I am such a kind character that I will of course do so from Mr Macdonald.

Lewis Macdonald:

I am glad to have allowed the minister to rediscover his generous side and very much appreciate his taking my intervention.

Whatever the minister’s view of the process that he is about to undertake in relation to CalMac, does he recognise my point that people in the islands are very anxious about the prospect of a private company taking over a successful public service? The point is absolutely real. It is not something that I have made up; it is something that people in the islands will have told him, had he been listening.

Derek Mackay:

I have been listening very closely to what islanders have been saying about ferry services and, to be frank, a lot of the anxiety is being caused by the Labour Party perpetrating untruths about the current process.

Lewis Macdonald also said that we should simply keep the contract within the current framework. However, he knows that doing so would be a breach of European regulations and would put the ferry services into some doubt, as we would be in conflict with regulations and subject to all sorts of challenges. We will comply with the law and get the best possible deal.

I will now do the reassurance bit for the islanders. Whatever the outcome of the procurement exercise for the Clyde and Hebrides ferry contract, the timetables will be set by Government, the vessels will be owned by the public sector and the fares will be set by the Scottish Government, through the operator. Of course, one challenge for potential operators is how they can consider the needs of island communities and respond to the suggestions that have been made in this chamber this afternoon around how they can further use the infrastructure, the hubs and the transport connections to give those communities further support on the transport side. There is an opportunity here, but there is no risk to services, as was suggested by Lewis Macdonald.

I am particularly interested in the legislative aspect of being able to choose the provider—that is, to choose Royal Mail. That is a very helpful suggestion. No matter what the Scottish Government can do in terms of ferries, routes, timetables, hubs or anything else, ensuring people’s rights through legislation would address a number of the issues that would be more difficult to address through perceptions or other interventions.

I commend Citizens Advice Scotland for drawing attention to this issue, for its work and for sharing with us its case studies and the evidence that it has produced. I can assure all members that that will inform future transport and island policy, as well as the business agenda.

In 2012 and 2013, Fergus Ewing chaired parcel delivery summits that led to the statement of principles, which I fully accept has not been adopted by as many people as we would have liked it to be. Again, if that statement were placed on a statutory footing—that could be done only at Westminster, not here—we would welcome that. I saw that the minister, Nick Boles, said that he does not want to go to primary legislation or even regulation, but that might be the best thing to do. I understand that he visited Colonsay during his summer holidays. I was also on Colonsay in the summer, although not at the same time. I know that he heard from islanders about their specific needs when he went there.

I raise that as an example because one of the interventions that I have made as transport minister is to consult on improved timetables. Why does that help? Because that might allow a better turnaround for deliveries to and from the islands, which might make it easier for carriers to get products and vehicles—because sometimes the issue is to do with vehicles being stuck on the islands—on and off the islands.

John Finnie:

There might be more beneficial mechanisms than putting more vehicles on the islands, which might be challenging in a competitive marketplace. Will the minister agree to play a facilitating role in the consideration of those options?

Derek Mackay:

Yes, I am happy to get Transport Scotland to consider the issues around collection hubs, transport hubs and so on. That is a helpful suggestion and I will commit to my officials undertaking that work in partnership with other stakeholders. Further, through community planning, it is important to encourage a focus on a sense of place and what more transport can do to help with this and every aspect of island living. I will also commit to listening to the comments of the rural parliament and the rural network. Like other members, I recognise that this is not only an island issue, although it is of importance to the islands.

Christine Grahame:

It is an issue in the Borders.

Derek Mackay:

Indeed—it is an issue across the mainland, including the Borders.

Work will also be taken with Citizens Advice Scotland and Highlands and Islands Enterprise to consider a range of models that might be deployed and replicated across the country.

There is a record amount of funding for lifeline ferry services. In this financial year, more than £145 million has been committed to support them. We have expanded the road equivalent tariff scheme across the Clyde and Hebrides network—that will be completed next month.

When commercial vehicles were eligible for RET, there was evidence that that reduction was not passed on to the customer. That has to be ensured before we can even consider using the scheme in that way. In 2012, we were able to allow commercial vehicles under 6m in length to qualify for RET. That means that post vans and smaller courier vehicles will get the discount, which means that they will pay less than the current commercial fares. Of course, the issue is about affordability and the need to ensure that those who are intended to benefit are the ones who benefit. That is why I am considering the current freight policy, too. I will report on that later this year.

That range of transport actions represents what the Scottish Government is doing. Like others, I again call on the UK Government to take action. Lewis Macdonald talked about a cosy chat with ministers but—who knows?—it might lead to further regulation and legislation. However, the principles should apply, so that we can have better universality of charges and do not discriminate against areas of peripherality, rurality or island living. I again call on the UK Government to act in that spirit.”

 

You can read the full debate here: http://www.scottish.parliament.uk/parliamentarybusiness/report.aspx?r=10104&i=93313&c=1863794#ScotParlOR