 The next item of business is a statement by Hamza Yousaf on the ferry services procurement policy review. The minister will take questions at the end of his statement and so there should be no interventions or interruptions. I call on Hamza Yousaf up to 10 minutes, please minister. Thank you, Presiding Officer. As minister for transport and islands, I am responsible for the provision of safe, efficient and reliable ferry services to the island and remote rural communities that rely on them for economic, social and cultural sustainability. It is a responsibility that I and this Government take extremely seriously. That is why my statement to Parliament on 2 February earlier this year announced a policy review on the future approach to the procurement of the Scottish Government's three contracted ferry services, namely the Clyde and Hebrides, the Northern Isles and the Gareth Dunoon town centre route. My announcement was informed by the Scottish Government's joint approach with the RMT trade union to the European Commission on the 1 April 2016 in the commission's response of 22 September. That correspondence concerned the possibility of making a direct award to an in-house operator in compliance with full requirements of the technical exemption and the state aid rules, potentially removing the need for competitive tendering procedures in the future. In my announcement on 2 February, I said that should the review conclude that it would be possible to apply the technical exemption and meet state aid rules, the Scottish Government would be minded to make a direct award to an in-house operator. That remains, her position, subject to wider financial and policy implications but, most crucially, the views of local communities and local stakeholders. On 20 July 2017 this year, I informed Parliament of the policy review's progress. I said that further consideration would be needed to be given to the application of the technical exemption and the state aid rules, following which a final decision can be taken on whether it would be possible to make a direct award to an in-house operator at some point in the future. I made clear that that would require an extension to the planned timeline for the completion of the policy review but that I would publish an interim report setting out the emergent findings and implications for each of the three ferry services. I have published the report, copies of which are available in Spice and from Transport Scotland's website. The report confirms that a direct award to a Teco-compliant in-house operator under the procurement regime would be compatible with the maritime cabotage regulation, subject to further consideration of how we will in practice satisfy the Teco control test. The control test requires the Scottish Government to exert similar levels of control over an in-house operator to that which we exert over one of our own government departments. The immediate consideration will therefore focus on changes to governance arrangements for David McBrane group of companies, something that we believe to be achievable and which can be completed with very little or no impact on employees. The report also confirms the need to satisfy state aid rules. The state aid rules pursue different aims from the procurement regime, although the two are related. State aid rules flow directly from article 107 of the treaty on the functioning of the European Union and state that any aid that is granted by a member's date, which threatens to distort competition, is incompatible with the internal market. It is therefore necessary to consider those rules when assessing the possibility of making a direct award to an in-house company, even if the in-house company is Teco-compliant. That is very clear from the commission's response on 22 September. In our assessment of the state aid rules, we have considered the application of the Altmark criteria, the 2007 passenger transport regulations and services of general economic interest. The conclusion reached us that it will be necessary to demonstrate full compliance with the four Altmark criteria in order to satisfy the state aid rules. The fourth Altmark criteria can be particularly challenging. It can be satisfied by means of a public procurement procedure, as highlighted in the European Commission's letter of 22 September. It can also be satisfied by means of a detailed benchmarking exercise to demonstrate that the compensation for discharging the public service obligation does not exceed that, which would be required by a typical well-run and adequately equipped undertaking in the ferry sector. It is therefore clear that there are a number of complex legal policy and financial issues that still need to be addressed before we can ascertain whether it would be possible to make a direct award to an in-house operator. However, I am working to address those issues in a positive manner. For example, we need to build a case for making direct awards that satisfy the Teco exemption in state aid rules. We have to follow up on the initial views of local communities and stakeholders. We have to engage rigorously with the European Commission on the final approach that we intend to take in relation to the future procurement of ferry services. It will take time to conduct the necessary analysis, and that is the implications for each of the three ferry service contracts. The Clyde and Hebrides ferry services will continue to be operated by CalMac under the terms of the recently tender contract. That contract will deliver efficiency savings and 350 service improvement commitments. That said, I believe that similar savings and improvements could also be delivered by means of a direct award to an in-house operator. That will be part of our case for making direct awards that satisfy the requirements of Teco and state aid rules. The current contract effectively guarantees that the Clyde and Hebrides ferry services will be provided by a public sector operator for the best part of the next seven years until the end of September 2024. Let me be clear that we cannot and will not put the protection afforded to the Clyde and Hebrides ferry services by the current contract at any risk whatsoever. We need to be sure that a direct award to an in-house operator would meet the full requirements of the Teco exemption and state aid rules before making such an award. If I can satisfy the European Commission, which I will work hard to do, it would be my intention to scrap future-tendering processes for the Clyde and Hebrides ferry services and appoint the contract to CalMac directly. The current contract provides a sufficient time for further detailed analysis to be given to CalMac's governance arrangements, as required by the Teco control test and detailed benchmarking that is required by the fourth altmark criteria. The conclusion of the analysis will then be used to build the Scottish Government's case for making a direct award to an in-house operator for the Clyde and Hebrides ferry services in the future. In the case of the Northern Isles ferry services, arrangements are in hand to extend the current contract by 18 months from April 2018 to October 2019. A decision on whether it would be possible to make a direct award for the Northern Isles or to continue tendering will have to be taken by the spring of 2018. This timeline will allow 18 months to complete a full tendering procedure, should that be required. In reaching a decision, we will take account of progress that has been made on further consideration of Tecl exemption and state aid rules. Crucially, we will also follow-up on our earlier engagement by writing to key local community stakeholders in order to build a better understanding of their preference for the future approach to procurement of the Northern Isles ferry services. Turning to Gwyrwch Dynun, the current contract was due to have expired in June of this year. That contract was extended by nine months to March 2018, and we will make arrangements to extend it by a further nine months until December 2018. A direct award allowing for the transport of vehicles under the state aid rules is not considered to be a deliverable option, given the limitations of public service obligation, which only applies to the transport of foot passengers. As the Scottish Government's long-standing policy position and the local community's aspiration is for the return of a vehicle-carrying service to the town centre route, tendering provides an approach that could potentially realise that outcome. For that reason, the currently paused tender exercise will be restarted as soon as practically possible. In setting out the implications for the three ferry service contracts, our priority is to ensure the provision of the best ferry services possible to our islands and remote rural communities, while ensuring value for money to the taxpayer. That priority is supported by our programme for Scotland 2017-18, where we set out our commitment to maximising the socio-economic development of our islands and remote communities through the provision of safe, efficient and reliable ferry services. The interim report, published today, demonstrates our continued commitment to delivering the outcome. The minister will now take questions on the issues raised in the statements for which I will allow around 20 minutes, so please press your question to speak buttons. Jamie Greene, please. Thank you, Presiding Officer. I thank the minister for advance sight of his statement. What we have learned today is that, despite more than 18 months of intensive wranglings, the Government is no farther forward in its pursuit of a policy to ditch open and transparent procurement of ferry services in favour of a strategy to direct their word contracts to a Government-owned entity, which effectively sews up future contracts, if given indefinitely to CalMac. Clearly, the out-mark criteria and technical exemption hoops that have to be jumped through are onerous and causing the Government unnecessary headache. In his own words today, they are challenging, to say the least. In the context of the following advice from Audit Scotland, which says that Transport Scotland will find it challenging to continue to provide ferry services that meets the needs of users within its allocated budget. All that being said, why is the minister dogmatically pursuing this ideological decision to avoid future tenders? What are the cost implications to this taxpayer, including the legal costs and Government time being spent on engaging with the European Union on its state aid rules? Moreover, given the success of recent tenders, including the iron service and the Clyde, does he not agree with me that tender process is a vital one and a vital one to ensure that incumbent operators are both kept in their toes, but also that it offers the Government the opportunity to choose the best operator from a variety of bids that meet the needs of users, but also provides value for money to the taxpayer. Can I try to be constructive to the member? I thought that he was unfair to say that we have not got any further forward. We have. It is our belief, through the detailed work that we have done, that we can make a case for a direct award. We have to, of course, satisfy the European Commission. The member will only roll clearly from his own party's discussions with the EU that those things can take a bit of time. We will, of course, approach that in a manner that can be as quick as possible from our perspective, but clearly we are reliant on the opinion of the European Commission. The work that has been done in the interim report is very detailed, and I would welcome some of his feedback on that. He makes a good point that there can be some perceived benefits of tendering. That competition helps those who are bidding to sharpen their pencils to make sure that they put in the most efficient bid. Competition can help to drive efficiency. I think that that is an argument that he and some of his colleagues have made to me before. It is not one that I dismiss what I would say on the other hand. I believe that it is possible to drive those similar efficiencies even with a direct award through KPIs. The other point that I would make to him is that, of course, tendering can cost—we know that the CHIFTS contract, the CHIFTS tender, costs around £1.1 million. That is not including the cost that would have emerged from CalMac having to bid, which, of course, is a wholly Scottish Government-owned company. He mentioned Aaron. I think that he would do well to speak to the community on Aaron to take their views on whether they would prefer CalMac to have this contract directly awarded or whether they would like competitive tender in the future. Our ferry services are run well. On the final point that he made in relation to the Audit Scotland report—in fact, the Audit Scotland report itself—it's opening line was that the ferry services in Scotland are run well. Neil Bibby I thank the minister for advance copy of his statement. There will never be some frustration that a decision on tech exemption has been delayed. However, I can say that this gives us the opportunity to get it right. I would ask that the minister builds a case with island communities, trade unions and members from across the chamber for ending the costly tendering process. Can I ask the minister how many times he has met the European Commission to discuss the four criteria and state aid guidelines? The minister will also be aware that specification changes can be made to the Northern Isle service irrespective of TECL. Will the minister agree to an expanded contract to include inter-island services and an increased freight capacity? Two weeks ago, this Parliament called on the Scottish Government to agree fair funding for inter-island ferry services in the Northern Isles. What steps has the Government since taken to ensure investment in the fleet does not put those councils at a disproportionate financial risk? Finally, since the minister's last statement, Audit Scotland has published its report on ferry services, it has found that there is no Scotland-wide long-term strategy for ferries. It said that it would be challenging to continue to provide ferry services that meets the needs of users within allocated budgets. In light of his statement today, how will the minister address the concerns that are raised by Audit Scotland? Does he accept that publicly-owned ferry services can be run effectively, affordably and in the public interest? I will engage with the unions and the other stakeholders on building a case. I have met them on a number of occasions, most recently on this issue, just a couple of weeks ago. My officials meet the European Commission on a number of occasions and meet them regularly to discuss the technical exemption. It is how we have managed to get to the position that we have got to. I thought that he strayed slightly off-topic, but I am sure that he accidentally went on to inter-island ferry services. I repeat what I said in the chamber only a few moments ago, which is that there is a window of opportunity for his own party to set on record whether they would support a final budget in February if it included provision for inter-island ferries. I asked his colleague Rhoda Grant that question, and she refused to say that she would. He has an opportunity, and any of his colleagues who are going to ask questions next can clarify that point. On the Audit Scotland report, I thought that the recommendations were very positive. They are the ones that we reflect on. We have a ferries plan up until 2022. The call for Audit Scotland must have a longer term. That is a very eminently sensible recommendation from Audit Scotland. As I said, it is one that we reflect on. Again, I am probably oversubscribed in questions, so please be succinct to Kenneth Gibson, followed by Maurice Corry. Thank you, Presiding Officer. As a constituency MSP for the island of Arna, I can say that certainty is very important to islanders in terms of service delivery, and therefore I believe that they will welcome the minister's comments today. I am just wondering about the issue of governance arrangements, which the minister talked about in his statement. I am just wondering if he can perhaps talk about what changes to governance would have to be made by David McBrain should the minister's plans come to fruition. In the interests of brevity, I am hoping that it can be minimal changes, because we certainly do not envisage that the changes that we will make will have any or only little impact on employees. It really refers to what you call the technical tests and the control tests. I will just read part A of that directly. It says that the contracting authority exercises over that person, controls similar to that, which it exercises over its own departments, which is called the control test. Essentially, we would have to ensure that David McBrain's governance was aligned in similar ways to our own government departments. Transport Scotland, perhaps, would be an example of that. We are working through the detail of that, what it will mean, and we will work closely with CalMac. The minimal change would be better, because I believe that the relationship that we have with CalMac works well on an operational level. Maurice Corry, followed by Jackie Baillie. I am pleased to learn from the minister that the guruk to the noon ferry tender process has restarted. Can the minister, this afternoon, confirm to the chamber that the timelines, process and any job losses in this tender are affected and also update us on the guruk to CalMac and ferry tender process itself? Hamza Yousaf. On his guruk to Cal Craig, I could not update him, because he knows that that is the responsibility of SPT, not this Government. However, I will look, I am sure, shortly to get an update before the holidays from Councillor Martyn for us, the chair of SPT. In relation to his other question, we do not envisage job losses as a result of this tender process. As I said, there is an extension, a further nine-month extension, to the contract at Guruk Dunun, and it is the only way that I can see, potentially, a vehicle service that could come into fruition. Jackie Baillie, followed by John Finnie. The minister has previously said that the transfer of the guruk to Cal Craig and ferry service from SPT to the Scottish Government had to await the outcome of the procurement policy review. Local passengers and members of the chamber have been very patient. Now that he has decided to tender the guruk to Dunun route, will he take steps to transfer the guruk to Cal Craig and ferry service as promise to the Scottish Government and provide me with an indication of the likely timetable? Again, I am entirely convinced that it is related to the statement. However, I will give the member an update. I would say that the promise has always been to have constructive dialogue in order to explore the fair funding formula for the transfer. We will continue to do that. The member will be aware that recently that service was retendered, and a number of bidders have come forward. Therefore, we are hopefully able to establish once a bidder has chosen what the true cost of that contract will be. That helps to inform our discussions, and I can give the member an absolute assurance that those conversations will continue in the constructive way that they have with SPT thus far. Can I remind members that it is about issues raised in the statement, though I can see that it has been very imaginative hooks going on here? Thank you, Presiding Officer. I thank the minister for early sight of the statement and commend the good work that has been going on—hopefully much more to come. Minister, community use is very important, but there is only one factor in decision making. The problem with a commercial supplier is that they will always weigh up, particularly a multinational one. It is all the way up cost and profits, so the situation cannot change. I think that a previous contributor talked about political philosophy. This is about a political philosophy. I support— Mr Finlay, thank you very much for your question, please. —exclusively in the public interest or not. Can you explain what waiting you put on the public's views, and would you accept that they can change? I do accept that they can change, but in terms of political philosophy, I have been very consistent since my statement in February that this Government's preference is for a direct award across the country. I would say that, equally, it is a political philosophy of ours that we should be listening to the communities themselves. If the community is our hostile to a direct award, if a community wishes to see a tendering for whatever reason, then I do not think that we can discount that. I would say that I would put a lot of weight to that, but that is not the only factor that should be considered by any matter or means. What I will be engaging with in the new year, and my officials will be engaging with, is the process of community engagement. Of course, I will keep the member updated on how that goes. Stuart McMillan, followed by Tavish Scott. Thank you, Presiding Officer. Can the minister have been more specific in terms of the timescale for the restarting of the Gwyrwchdenan tender exercise and also what does he hope to achieve with that process? Effectively, it will start as soon as practically possible. Obviously, when we pause tender, it is the number of things that will have to do to restart it, but early in the new year would be the intention to restart it. The extension that we have asked for takes us up to December 2018, so a new ferry contract would have to be in place by then. However, I can keep the member updated on the progress of the tender exercise. Tavish Scott, followed by John Mason. Would the minister accept that people in the Northern Isles, Oregon and Shetland, will be today disappointed that he has not announced the re-tenning of the North Isles services, because that is very much what they wish to see, and that was reflected indeed in his own document that has been published today? Would he accept that he decides to take this in-house? We will see a freight operation set up in competition with that, because that is what happened 15 years ago, and I do not think that that is in the interests of either the Government or indeed the islands. Therefore, would he undertake to get on with that re-tenning of the Northern Isles, which is very much what is looked for, and also publish the freight fares review, because that is also a document that is badly needed not just in the Northern Isles, but in the West Coast as well. I find that a very helpful contribution from Tavish Scott. I did not mean to sound surprised when I said that, but it is a genuinely helpful contribution from Tavish Scott. On the freight fares review, we obviously did not commit to a timing of when to publish that, but I accept his point wholeheartedly that whenever I travel to the islands, that is an issue that is raising much concerns. Therefore, I accept what he says, and I can give him an assurance that we are working to get to a solution where, of course, we see the benefits of a review and policy, and I do not think that we have got to that position yet, so I will continue to keep him updated on his more substantial point. I found it interesting and helpful, because it is probably the first time that I have had an indication from the constituency member that they would be opposed to a direct word of that, is what I heard correctly. On my travels to Shetland and Orkney, I have to say that, at best, it seems that the community is agnostic at some very openly hostile to that. Of course, his view on that will be important to me, as will the MP's view, as will, of course, the council's view, as well as ferry groups in local communities, but he can get assurance that the extension of the contract will, in some way, give reassurance to the local community in Shetland that they will have stability for the 18 months that we have extended the contract. John Mason, followed by Jamie Halcro Johnston. I very much welcome the fact that the minister is proceeding carefully in all of this. Could he spell out for us what the risks are if he was to rush this process and make an in-house award? John Mason was an accountant in a former life, so I am pleased that he is continuing that prudent approach. He is right that we have to be careful in terms of the approach that we take, because if we simply directly awarded a contract without satisfying the state aid rules, without satisfying the TECL criteria, then, of course, there would be a real potential that it would be challenged by the European Commission and therefore we would have to re-tender, which would be a costly exercise in itself. We have to make sure that we fulfil the various criteria, whether that is state aid or whether that is TECL. I am of the opinion that we can do that. That will be the approach that the Government will be taking, and as I say, if we can satisfy, certainly for Clyde and Hebrides, it would absolutely be my intention to scrap any future tenders. Jamie Halcro Johnston, followed by Angus MacDonald. Can the minister update us on the outcomes of discussions with Serco Northlink on the extension of the Northern Isles Faries contract to October 2019? Is he able to give assurances that the extension to the contract will not have any adverse impact on the current service? I can absolutely give that assurance. I have a very good working relationship with Stuart Garrett, who is based at Serco Northlink. He has been very helpful, very constructive from day 1 on his approach, and I commend him and give him credit for that. Therefore, there will be stability for the Northern Isles, for the service that they receive, and there should be no detriment at all in service for the period of that contract extension. Angus MacDonald, followed by David Stewart. I should refer members to my register of interests to own a non-domestic property in the Western Isles. Personally, I hope that we see the scrapping of future tendering processes for Clyde and Hebrides ferry services, which CalMac appointed indefinitely. I am sure that the majority of customers share that hope. Does the minister agree that the priority of this whole process is to guarantee the best ferry services possible and also to ensure value for money for taxpayers? I think that that is absolutely right, and it takes me back to my answer to Jamie Greene's question. We have to ensure that, if we get to a position where a direct award is possible is legally compatible, we have to ensure that the appropriate KPIs are put in place so that efficiency is driven throughout the contract and best value for the taxpayer and for the consumer. It is worth saying that, of course, there has been a huge increase in ferry traffic and tourism to our islands. There is no doubt that it is driven by our decision to roll out RET in the Western Isles. I hope to see a similar boom in tourism as we look to roll out RET in the Northern Isles—a manifesto commitment that we have met that will be rolled out in the first half of 2018. David Stewart, followed by Mary Gougeon. The minister refers to the challenging nature of the fourth alt-mark criterion, but, as Thomson's listeners have made clear, the criterion has been successfully met in the past, in case L189 of Leake III on the Italian Postal Service. Could the minister ask his officials to check the case, as it may help in discussions around the Northern Isles and the Gourik to Dunoon ferry service? I will, but I know that they have checked it. I have also looked at the case. I know that it is one that has been raised by David Stewart himself and also raised by the RMT. I thank David Stewart—I should say very much on the record—to a driving force around the issue of the tech exemption along with colleagues in the RMT. What I would say to David Stewart is that it is also my belief that we can satisfy both the state aid criteria and the tech exemption test as well. I have clearly got to make that case to the European Commission and it is for the European Commission to determine whether or not we have satisfied those, but I know the case that he is talking about and, of course, I will give it a further reflection. The last question in the statement is from Mary Gougeon. Can the minister confirm that any decision to be taken will not delay arrangements for the introduction of cheaper fares on the Northern Isles service? Well, you have also passed yourselves this afternoon. I have to say that we have run out of questions. That concludes questions on the 30 services procurement policy review. We shall move on to the next item of business. I will give you a couple of minutes to shift seats around.