 The First Item of Business this afternoon is a statement by Humza Yousaf on Scotland's ferry services. The minister will take questions at the end of his statement, so there should be no interventions or interruptions until then. The Scottish Government's lifeline ferry services are essential transport links that make a significant contribution to the social, cultural and economic wellbeing of our nation. The Scottish Government clearly recognises our responsibility to ensure that essential services remain at the heart of island and remote communities. That is clearly evidenced by our record levels of investment in the order of £1 billion in vessels, ports and services since 2007. We continue to seek innovative ways to protect and improve the delivery of ferry services in the future. That is why I am today announcing a review into the legal policy and financial implications relevant to the future procurement of those services and setting out my reasons for doing so. Members may be aware, or have first-hand experience, that, since the turn of the century, successive approaches by that and previous Administrations have been made to the European Commission covering a range of questions on our obligation to tender ferry services. In 2005, the previous Scottish Executive published its own in-depth report into the consideration of the requirement to tender, which ruled out alternatives to tendering. In 2009, the commission concluded its own in-depth investigation into Scottish ferry service subsidies. The conclusion was that the service did not meet the alt-mark criteria and were therefore covered by state-aid requirements. With the exception of the Gwric Dunwun route, the aid was considered compatibly, only due to the tendering of the services. The decision also concluded that the Gwric Dunwun route had to be subject to competitive tendering. In 2012, Transport Minister Keith Brown wrote to Commissioner Almunia encouraging a further review of the requirement to tender ferry services. The commissioner at that time in 2012 replied, and I quote, "...the commission is, however, convinced that a transparent and non-discriminatory tender for public services is the best way to ensure that the public is afforded the best possible services in terms of both quality and price at the lowest possible cost of the taxpayer." Consequently, the commission strongly advocates the widest possible use of open and transparent tendering procedures when public authorities and trust companies with a public sector obligation. The commission emphasised similar points in the published guidance on the maritime habitat regulation, dated 22 April 2014, in paragraph 5.4.2. It states, "...launching an open tender procedure is, in principle, the easiest way to ensure non-discrimination." It also added, "...the commission believes that a direct award fails to respect the principle of non-discrimination and transparency enshrined in article 4 of the regulation." The commission therefore consistently advocated the widest possible use of open and transparent tendering procedures when public authorities and trust companies with a public sector obligation. That view has consistently been based on the premise that tendering satisfies the requirement of EU legislation, applying to ferry services, including the maritime habitat regulation and, importantly, state aid rules. We take very seriously our obligations under European and domestic law. We are confident that we satisfy all European and domestic requirements for public ferry service contracts. That has been achieved through a number of successful competitive tendering processes over the past 10 years or so, including, of course, most recently the award of the Clyde and Hepadies contract to CalMac ferries limited last year. That award was made in full compliance with the legal requirements and all the advice available to us from the commission at that time. The tendering of those services has guaranteed their future in a programme of investment improvements up until 2024. Following a debate in this chamber in the 25th of November 2015, Derek Mackay, the then Minister for Transport and Islands, wrote jointly with the RMT, Tread Union, to the European Commission on 1 April 2016, the letter followed numerous approaches by the Government to seek the commission's view on the legal requirement to tender the Clyde and Hepadies ferry services. In particular, it sought clarification on the application of the technical exemption, which was argued that it could potentially allow the services to be operated by an in-house provider without the need for competitive tendering. The commission responded in the 22nd of April 2016 formally, stating its view that the technical exemption should be capable of being applied to the maritime cabotage regulation under strict conditions. That could, if those conditions were met and subject importantly to compliance with stated requirements, allow for the direct award of ferry services contracts to an in-house operator. That response, when considered alongside the commission's published guidance, suggests that it is appropriate that we now take time to consider further that important issue. I should emphasise that the commission's response, which I will share in place in Spice so that Parliament and members can see for themselves, makes clear that, in addition to meeting the particular requirements of the technical exemption, any award in his operator must comply with stated law and the altmark criteria should be considered in that regard. I welcome the commission's response and have used the time since to consider the complex legal and policy questions that it raises. Furthermore, the commission's response was received during preparations for a live tender exercise for the next group during contract. We had already, for example, concluded the pre-qualification assessment and were in the process of informing the participants. It was therefore necessary to give careful consideration to the full legal and policy implications for the tendering process and the current contract before making a public announcement. I have therefore concluded that a policy review should be conducted to identify and consider in detail the legal policy and financial implications that are relevant to the procurement of ferry services, including the possible application of the technical exemption in light of the commission's letter, the requirement to ensure compliance with stated rules and all other legal policy and financial implications that are relevant to alternative models for procuring ferry services, including examining the organisational structure and the governance of David McBrain Limited and Caledonian Maritime Assets Limited. The review will draw on expertise from across Transport Scotland and the Scottish Government to look objectively at the options and make recommendations to ensure that ferry services are affordable, sustainable and provide confidence to ferry users, communities and employees going forward. Our overriding priority is to provide the best service possible within the framework in which we are required to operate, and the review will consider a range of options. Given the number of strict tests that relate to the application of the technical exemption and stated rules, all of which would need to be satisfied, no assumptions should be made on the outcome of the policy review. Nothing can be ruled in or out at this stage. However, while not prejudging the outcome, should the review conclude that it would be possible to apply the technical exemption and meet stated rules, we would, as the Government, be minded to provide ferry services through an in-house operator taking account of the communities that they serve. That would, of course, be subject to wider policy and value for money implications and, indeed, importantly and, crucially, the views of those communities affected. I am, of course, fully committed to keeping everybody in this Parliament and chamber informed about the purpose and progress of the review, including ferry users, local communities, local authorities, ferry operators and trade unions, as well as members of this Parliament. As a first stage in that engagement today, I will be speaking and writing to a broad range of key stakeholders. I will also be arranging an early meeting with trade unions, in particular the RMT and Dave Stewart MSP, who has previously raised those issues with ministers, but also with other MSPs, whom I know will have constituency interests, to discuss the purpose and the remit of the policy review. The reviewer will require a specific and urgent focus on the current tendering of the good at the noon services to be closely followed by the implications for the planned tendering of the northern Isles ferry service. It is less time-pressure to reach a definitive future position on the Clyde and Hebride services that current contract of course has seven years to go before it would be subject to any potential further tendering requirements. The reviewer will clearly require detailed consideration to be given to a number of very complex legal, policy and financial issues, and that will take time. I am therefore announcing a pause in the current good at the noon tendering exercise to allow time for the review to be conducted. That will require an extension to the current good at the noon contract in the order of around nine months, which we have concluded would be justifiable under regulation 72.1e of the public contract Scotland regulations 2015. Transport Scotland will work closely with the current operator, our Gail ferries, limited on arrangements for the intended extension. The reviewer will also consider what, if any, extension period may be justified and necessary for the northern Isles contract, which is due to end in April 2018. At this point, I would like to assure the people, businesses and communities who rely on our ferry services of the continued delivery of safe, efficient and effective services, and that continuity of service, delivery both now and in the future, remains my top priority during the course of this review. The final report will set out recommendations for the sustainable delivery of ferry services in the future and will be made available to Parliament and published on the Transport Scotland website. Ministers will engage closely with key stout holders when considering the full findings of the review. The final decisions on the best approach to improve the future delivery of ferry services will be based on objective and robust analysis of the evidence provided by the review. Our lifeline ferry services are essential to the economic and cultural life of our islands and remote communities. I would ask that Parliament joins me in supporting the pause and the tendering for good at the noon contract and also the policy review and the best approach to delivering our essential and iconic ferry services now and into the future. We will now have about 20 minutes for questions. If members wish to ask a question, I would encourage them to press their request-to-speak buttons now, and I call on Liam Kerr to ask the first question. I thank the minister for advance copy of his statement today. We welcome the acknowledgement by the Government of the concerns raised in multiple quarters over the recent competitive tendering process for the Clyde and Hebrides contract last year. I think that we can all welcome that the Government has taken action on this and sought clarification from the European Commission. However, there will be genuine concern at commercial ferry operators on seeing this statement today. They will see the Government's stated preference for an in-house operator as a direction of travel that may ultimately see an end to competitive tendering for our ferry routes and or automatic preference to any such operator. Should the review find that it is possible to apply the technical exemption and meet state aid rules, would that mean that there will be an end to competitive tendering of ferry services in Scotland? If not, can he guarantee that any such tendering exercise will not be preloaded in favour of an in-house operator? Can he also today give an assurance that local groups and stakeholders will have a chance to input into this review to ensure genuine feedback into what is affordable, sustainable and provides confidence to users, communities and employees? I thank the member for the question in the constructive manner in which he asks it. If I can take that last point and give him an absolute assurance that communities will be at the heart of what we are doing in regard to this policy review, their views are incredibly vital and important to forming our future direction on this. I am keen not to prejudge the outcome of that policy review, but I understand why he asked the question that he asks. I would say that if the technical exemption can apply, what we have said is that if it can apply, if it can comply with state aid rules, but, crucially, if communities want it—and I think that that is really important—then the Government absolutely is minded to make a direct award to an in-house operator. It may well be the case that particular communities, even if all the criteria can be met, if state aid rules can be complied with, may well be communities, for a number of reasons that the member highlighted in his question. They may not want to direct the award, they may wish a competitive tender, then we should be open minded to considering what communities want as opposed to what the Government is necessarily minded to do. I do not want to prejudge the outcome of that. I will look forward to hearing from him and his party in the course of that, but I want to give him an absolute assurance that communities will be at the heart of everything that we are doing. Rhoda Grant, to be followed by Kate Forbes. I thank the minister for an advanced sight of his statement. First, I would like to put on record our thanks to the RMT trade union and my colleague David Stewart MSP for their hard work and persistence, not only on behalf of the workers in the sector but also the people who depend on lifeline ferry services. In 2015, Scottish Labour joined the RMT, the daily record and others, calling for the Government to use the technical exemption and reject the tendering process for the Clyde and Hebrides contract. That is why Scottish Labour welcomes the announcement today that there will be a review to look at the legal policy and financial implications on ferry service procurement. Given this review, it is sensible and understandable to extend the current Gwruch Tadunin contract. However, will the transport minister provide assurances that there will be the continuity of employment and conditions for the workforce on that particular route and, if necessary, on the Northern Isles route? Can he also provide an assurance that whatever the outcome of the review that the jobs and conditions will be protected and that the workforce will continue to be subject to 2P protection? Given the timescales on the matter, can I ask the transport minister why it took four months for him to publish the response from the European Commission when he said that his statement was received on 22 September? I thank the member and again I thank him for the constructive tone in which he asked the question. I also put on record my thanks to the RMT and again the approach that they have taken. David Stewart is well for his indifat stability on this particular issue. On the questions that the member raises, I can just give him a short answer that, yes, the rights of workers, the collective bargaining, the continued no compulsory redundancy policy that we have will continue regardless of the policy review, so I can give him that protection. What I would say is that it is very clear from the commission's response, which again, as I said, is available to members through SPICE, it is very clear that we will have to look at the governance and the structure of CalMac and Semal. That is absolutely going to be part of the policy review, so we will keep members involved and up-to-date in that discussion. What I would say also in terms of the fact that we received the response in September in making the announcement today, that is for three very important reasons. First of all, we had to ensure that because this advice was somewhat different to the advice not just received by us, but I should say received by previous executives, including, of course, the Labour-Liberal coalition, because this advice was slightly different. The first thing was and the priority was to ensure that this advice was consistent across all the DGs of the commission. The second and more fundamentally important reason why I had to give time was, of course, if I had made this public announcement as soon as we would receive the commission's response, while a live-tending exercise was going on, all sorts of uncertainty would have been thrown up. I think that the member would appreciate, even though he is a strong critic understandably of the actions that we have taken, that he would understand that procurement legislation is extremely complex. I had to find both the legal route whereby we could halt the current tender, and I think that that is important. I also had to ensure that we had a legally watertight position in order to extend the contract by nine months. That does not mean that there will not be a legal challenge. I suspect reasonably that there may well be, but I had to ensure that we had those legal ducks in a row before making any sort of announcement, so I hope that that gives them the reassurances that they require. Kate Forbes, followed by Donald Cameron. Thank you, Presiding Officer. Can the minister guarantee that the policy review that he announced today will have communities at its heart and ensure the best possible public ferry services to all of our island and remote rural communities who need long-term confidence in their lifeline ferry services? The short answer to that is, yes, that the communities have to be at the heart of that. As I said, I have travelled around the country in this job in the nine, ten months that I have been in this role, and absolutely communities have differing views on how they think lifeline services should be provided, so yes, they will be at the heart of this policy review. Donald Cameron, to be followed by Rhoda Grant. Thank you, Presiding Officer. Likewise, alongside Liam Kerr, I welcome this review and understand the implications of the decision. Representing the Highlands and Islands, I know first-hand how concerned and worried the people of the Cowell peninsula and Danun in particular have been for quite some time about the reliability and frequency of the route. Can the minister assure me that the nine-month delay to the tender will have negligible effect on the future of this service, so that both residents and visitors to Danun can soon look forward to a more robust service? Can I just give the minister the assurance that the continuity of service for me is the absolute top priority? Whether that is in Grick or Danun, the Northern Isles, the Clyde and Hebrides services, the continuity of service is absolutely for not just individuals but businesses, which are so vitally important. I can give him that reassurance. I do not want to prejudge the outcome of the review, but, of course, the immediate focus of that review has to be the Grick Danun service, which he rightly mentions. Rhoda Grant, to be followed by Stuart McMillan. Thank you, Presiding Officer. Can I also welcome the review and pay tribute to David Stewart and the RMT for their tenacity on the issue? Can I ask if the trade unions will be involved directly in the review group and communities further to Kate Forbes' question? Will they also be involved in that group? They all have a stake, and it is only right that they should have an involvement in the group itself. How long is the review likely to take? I will try to provide a succinct answer. The policy review will be undertaken by Transport Scotland, but as the key engagements that we will be engaging with the RMT in straight away, the first meetings that I will look to have on this will be with David Stewart and the RMT, which Rhoda Grant is right to say, have been leading on the issue. In regard to the second part of the question, I can give assurances that the communities who will be involved in the third part of our question are the reason why we have asked for that nine-month extension, which we think is justifiable under 72.1E of the public contracts 2015 regulation, because we think that it will take around nine months for that. If the review kicks up further issues, because stated, it can be quite complex, as members will appreciate that we may have to look again at that timeline, but we are looking to get that review under way as soon as possible in that time scale. I want to remind members that my wife works part-time for CalMac and Gherwick. In the statement, the minister spoke about the current structure and governance of the David McBrain group of companies, which includes CalMac, whose HQ is in my constituency. Can the minister provide some further information on any implications regarding the David McBrain group in my constituency? If I can just give him the reassurance that I have given in previous answers, we do not foresee changes in employees' terms, their conditions, and, indeed, the no compulsory redundancies policy and collective bargaining policies continue to remain as they are, and that will continue throughout the policy review period. I will say that, frankly, it is a part of the policy review because of the commission's response, which I would urge the member to have a look at. It makes it very clear that we will have to examine the governance structure of CalMac. I think that, without prejudging again, the outcome will be looking at more of the management structures as opposed to effects on employees as such. However, as I said, I cannot prejudge any of that, but I will be meeting with the unions as soon as I possibly can in order to give them the reassurances around employees. John Finnie, to be followed by Marie Todd. Thank you. I thank the minister for early sight, the copy of his statement. Welcome the review and indeed support the position regarding Gherwick to Noon. I heard what you said about time frame, minister, but in first acknowledging that it is important that we get it right, would you recognise the enthusiasm that there is to ensure that the beneficiaries of public money in the Northern Isles ferries are the residents of the Northern Isles rather than the private shareholders of a circle? I understand the point that the member is making, and all I can say is just to reiterate that the communities will be at the heart of that. I thank him for his welcome to the approach that we are taking, but communities must be at the heart of that. Having travelled to Orkney, Shetland, it would be fair to say that, for the communities that I have spoken to, they want to know about continuity of service. They want, as they have spoken to me, to see that reduction in that ferry fares, and we have committed to do that and to examine that, and that will not be affected by the policy review. Communities should be at the heart of that. As I said, the Government is minded where the technical exemption can apply, where state-of-the-art drills can be combined with, where communities want it, an in-house provider—a direct award should be made to an in-house provider. Marie Todd will be followed by Tavish Scott. The Northern Isles contract is currently due to end in April 2018. I wonder if the minister can set out what effect this policy review will have on this contract. Can the minister assure the passengers that the continued provision of the Northern Isles ferry service and continuity in service delivery is a top priority of this Government? Yes, I can, and I hope that I have been able to do that throughout my statement and answering those questions, that the continuity of service absolutely has to be my priority and will be my priority and continue to be this Government's priority as well. She is right that the contract would end in April 2018, and the tendering process for the Northern Isles ferry service is due to start in spring. That will not happen because the policy review, of course, will be under way, so already discussions have begun with, say, a quote about a possible extension to that contract and that continuity of service, and, of course, we will continue those discussions at a pace. Tavish Scott will be followed by Jamie Greene. I think that the Chancellor Minister for the statement that he has given to Parliament in the advance copy that we have had in it, on his last point, does that mean, therefore, that it is nearly sure that the current Circle Contract for Auckland and Shetland will now extend beyond next summer? Could he also clarify the position with regard to the fares review, because his Government has promised substantial reductions on ferry fares to the Northern Isles following the 50 per cent cut to the west coast? When will we see announcements on that, and will indeed the Auckland and Shetland see those reductions that have been promised? Lastly, given the possibility of full Brexit, there would be no EU procurement rules. Will the Chancellor Minister be minded to ensure that his review covers that eventuality as well? I thank Tavish Scott again for the constructive nature of the questions. On the extension of the contract, I would say that it would be highly likely that we will have to look for an extension to that contract, because no longer can we start the tendering process and spring of this year will have to wait until the policy review is done. We are already talking to the provider Circle about a possible extension, and I will make sure that he is kept up to date with those conversations. I can also give him reassurances on the work that we are doing to reduce the ferry fares, as the First Minister committed to and as our manifesto committed to. I have always been very clear on that point that it is not tied to the next contract. In fact, if we can bring ferry fares reductions before that contract, we would seek to do that. With that position, it does not change the work of the working group and that respect has not changed. Again, I will keep the member fully informed on the ferry fares reduction. I can give him an assurance that he is, of course, right that the policy review should take into account the possible implications of Brexit. He understands and knows the Scottish Government's position on all that, so I will not rehearse it, but notwithstanding that, yes, the potential impacts of Brexit will be part of the policy review discussion. Jamie Greene, followed by Kenneth Gibson. As the minister is aware, there are currently three services running out of Gwyrwch. Three different routes, three different operators, and three different lines of accountability and governance is described by one local user group as a complete mess. I note with interest that the minister does not want to pre-empt the outcome of the review, but in the same sentence does use language like expressing a preference for an in-house operator. If he can confirm to today and give some commitment to the long-term security of the Cochregan route, because that is very important in this triangle that is currently funded by SPT, it is also more important to reassure the chamber that we do not end up in a scenario where the review outcome gives automatic favour to Government-owned operators at the expense of transparency and reliability to local users. I will try to give him some assurances. The Cochregan issue is a separate one, and I will speak to him perhaps offline or right to the member on that. He knows that discussions between Transport Scotland and SPT have been on-going on the fair funding principle, and in principle we have an agreement to take over that service. That is a slightly separate issue as to what is in the policy review. On his wider question, I can just give him an assurance on the continuity of service. I can also give him an assurance that communities—I think that I know which community group he is probably talking about—the wishes of communities will be very much at the heart of what we are doing. On Government's preference, that is not an inconsistent view at all. I am not prejudging the outcome, simply saying that we have made known what our preference is in that regard. I look forward to hearing from the Conservatives their input into that policy review. Kenneth Gibson, to be followed by David Stewart. After years of extensive engagement and correspondence on the issue under this Government and previous Administrations, what the ministers announced today suggests that the commission's view may have changed in the event of a direct award under the technical exemption. Whilst complex state aid rules will still need to be satisfied, does the minister agree that the review will encourage many to look forward to the strong possibility that ferry service contracts will be awarded to an in-house operator? I would not want to prejudge the outcome of the review, but the member is correct in saying that, of course, commission advice not just to my previous predecessors, Keith Brown, not just in terms of this Government, but, of course, commission advice received by previous executives and Governments has been consistent in that the technical exemption could not apply. Yes, it would be correct to say that the commission's view in that respect has seemed to shift. That does not mean that there are not obstacles still in the way and there are some serious, serious issues that have to be examined. State aid rules, of course, still have to be complied with legal, policy and financial questions that have to be answered, and the policy review will look at them in the fullest possible manner. David Stewart will be followed by Angus MacDonald. Thank you, Presiding Officer. I warmly welcome this afternoon's statement from the minister. Nearly two years ago, following advice from the RMT, I met the European Commission officials to discuss the technical exemption. They said that, in principle, it was acceptable and consistent with previous European Court of Justice cases. Could the minister verify the cost to the public purse of tendering the last Clyde hebedean, Gerrit de Noon and Northern Isles ferry services and, in the future, that could be a substantial saving to be reinvested in public services? Can I say what I said at the beginning of this and, in some respects, pay tribute to the hard work that David Stewart has done on this issue that he's made with me when I first became transport minister on this. I want to thank him for the advice that he's given in that regard. I'll get him the figures and the facts. If he doesn't mind, I'll write to him, but I know that the chief's contract he'll know came at a cost of £1 million in terms of the other contracts that he asked about. If he doesn't mind, I'll give him a written response to that. I can absolutely give him assurance that I'll be looking to engage with him. In fact, we've emailed his office to seek an early meeting with him and with the trade unions to have a discussion on that. I look forward to his views during that policy review. Hailing from the Hebrides has very much welcomed the latest advice from the European Commission on the Tecal exemption and I look forward to the outcome of the policy review. What chance does the minister see that the policy review will result in a means of procuring ferry services other than by a public tender? Again, if I can just reiterate, I wouldn't want to prejudice the outcome of the review. I've given an indication of where we'd be minded to go as a Government, but if I can just reiterate that point, there are some very serious questions that will take time to delve into from the financial to the legal to the state aid rules and the potential implications of Brexit as well. I think that I've made my position in the Government's position on this in terms of our preference fairly clear. Thank you, minister and members. That concludes