Council turned down Norwegian loan for tunnel to Whalsay, ASCC meeting hears
Jim Tait
The council’s apparent refusal to accept Norwegian funding for a tunnel from the Mainland to Whalsay was aired at Saturday’s biannual meeting of the Association of Shetland Community Councils.
Following a robust exchange of views, the question of fixed links to Whalsay and other islands is likely be back on the agenda for the next meeting of the association.
The SIC’s current position was discussed at Saturday’s session, held in Shetland Museum’s auditorium, following the submission by Whalsay representative William Polson of a freedom of information request relating to the issue.
Part of Mr Polson’s FOI request relates to proposed costs for the project, which he said was the preferred option of the Whalsay folk over ferries.
He wanted to know why, after a Norwegian company had estimated the rise of tunnelling costs to be between six and 10 per cent between 2002 and 2004, the SIC’s proposed costs had increased by 40 per cent and 80 per cent during that period and more than doubled again by 2008.
The FOI request also refers to discrepancies over the length of the Whalsay tunnel, previously put at 5.7 kilometres (between Fora Dale on the Mainland to Marrister in the isle) but later quoted by a council official as 7.1km.
Mr Polson told the meeting that a Norweigian export finance company could have been prepared to invest up to 85 per cent in the cost of a Whalsay tunnel, but the council had not been willing to take the offer any further.
Tunnels and/or bridges to Whalsay, Yell, Unst and Bressay have been seriously considered by various councils since the start of this century. The high cost of construction is believed by many to be a cheaper option in the long run than continuing to run ferries at ever-increasing prices.
As far back as 2001 the SIC heard from Eivind Grøv, a civil engineer from Norway where over 20 sub-sea tunnels had been constructed in the preceding 20 years.
At that time a tunnel just under six kilometres (roughly four miles) was likely to cost just over £20 million.
In August 2004, in its “Islands Links” strategy, the council again explored the idea of tunnels. A report put the cost at between £55 and £60 million for a tunnel to Whalsay, between £30 and £36 million for a tunnel to Yell and between £18 and £22 million for one between Yell and Unst.
On the question of the Bressay link, the report stated that a bridge had been the aspiration of Shetland Islands Council for 30 years. A project was said to be “currently progressing through the various consents processes” with detailed design to commence soon.
In June 2010 the SIC decided to patch up the ailing Whalsay ferry infrastructure in the hope that external funding became available in the future for fixed links to all the large islands.
Councillors voted 11-10 to reject the advice of then head of finance Graham Johnston who had recommended spending £26.2 million on building a new terminal at North Voe in Symbister, improving the terminals at Laxo and Vidlin and acquiring a new ferry for the route.
That was despite Mr Johnston’s proposal being the third of the price of a tunnel, believed to be around £83 million. There was expected to be no Scottish government or European funding available fur such a project before at least 2015.
Later in 2010 it was agreed to spend £50,000 a year to hire a senior manager to push ahead with the plan for four tunnels to the main islands. The capital cost then was reported to be in the region of £300 million.
At that time councillor Gary Robinson, now the SIC’s political leader, described building new ferries and terminals as “short-termism of the worst kind”. Fixed links were the only viable option for the future and the council had to show potential funding bodies it was serious about them, he said.
“We must press on with this for the sake of Whalsay and the other isles,” Mr Robinson said in 2010.
Two years later, after a vote showed that the majority of Whalsay residents would prefer a tunnel rather than continuing with ferries, island representatives were engaged in dialogue with Norwegian consultants.
It emerged that an export finance company, run by the Norwegian government, would be willing to invest around £40 million in a Whalsay tunnel, about 85 per cent of the cost at 2012 Norwegian prices.
The SIC was aware of the offer but chose not to pursue it further, apparently because of a lack of clarity over what was actually on the table.
Mr Polson told Saturday’s meeting that he wanted to acknowledge the history that had gone on over the years, particularly in relation to Yell Sound.
He said: “Nearly £100 million has been spent on Yell Sound [ferries]. I’m not wanting to see that spent on Whalsay. I’m not happy with the way it’s been dealt with by the SIC.”
Chairman of the council’s environment and transport committee, Michael Stout, who recently attended a meeting in Whalsay on fixed links, but was not an SIC member in 2010, wanted to know whether Mr Polson was representing Whalsay Community Council. His own understanding was that the community council was satisfied with the SIC’s position.
“Yes I am,” replied Mr Polson. “This is the view of the Whalsay Community Council. They are not happy with it.”
Chairman Jim Gear asked Mr Stout: “So the members that attended the meeting said they were satisfied?”
“So I believe,” replied Mr Stout.
“The Whalsay Community Council has a freedom of information request in just now,” Mr Polson said. “In that respect the Whalsay Community Council can’t be satisfied.”
Bressay representative Jim Shepherd asked what the “pecking order” was for fixed links. It was years since Bressay was supposed to be the first and then the project was pulled.
The process had been discussed at length, Mr Stout said, in order to get Scottish government approval for a particular link. If there were still concerns about the process “we would be happy to hear them”.
Mr Stout said speaking about a “pecking order” was not the best way to look at it. In the past there had been an “ad hoc” approach taken.
“What’s very clear is that there are a very wide range of costings,” he said.
“Therefore things like the pecking order becomes very important to Bressay.
“We are miles away from a formal decision, [but] I’m confident that the process we have gone through has been competent and has got it to the place we are now.”
Mr Polson was not impressed, however, and repeated his belief that the council had gone down the wrong road over the issue.
He said: “It seems to be forgotten that the council voted for fixed links and the Whalsay public also voted to pursue fixed links.”
It needed to be seen “in terms of national infrastructure,” Mr Stout replied.
Mr Polson said there had been an offer from the Norwegian government to fund 85 per cent of the cost of a Whalsay link, but the council had turned it down.
It had not been clear what the offer was, Mr Stout suggested.
“It was quite clear,” Mr Polson retorted. “The council was to pay 15 per cent.”
Chairman Jim Gear suggested that if Whalsay Community Council members wanted to put the matter back on the agenda for the next meeting they should do so.
John Tulloch
More evidence of unexplained tunnel cost inflation, this time from the SIC’s own records!
These revelations just keep coming. The public, especially, isles residents, deserve an explanation the SIC seems remarkably reluctant to give one.
I assume a palatable one does exist?
John Tulloch
The failure to follow up this loan offer seems extraordinary and lack of clarity over some aspects is a poor excuse that, presumably, cannot now be corroborated.
We are not told the interest rate however we know rates were low after the financial crisis and Norway, with its strong currency would likely be among the lowest. If there was some lack of clarity, would not the thing to do be to follow up with appropriate inquiries?
Was any of this made public knowledge at the time?
John Tulloch
The livelihoods and lifestyles of 3000 people, not to mention the very existence of their communities – ask the Skerries folk – are at stake here.
It’s time for the prevarication and procrastination to stop, action is needed and its needed now.
Gary Robinson
I’ve had sympathy for the argument for fixed links to our islands for a long time – long before you and your one-time associate laid out your plans for a tunnel to Whalsay and an extension to Symbister Harbour on my dining room table.
If the council decided that it wished to extend the harbour at Symbister then your suggestion of using the tailings from a tunnel to Whalsay could easily be a viable option but “IF” is the important word here.
I’ll deal first with the fixed link option where council policy remains supportive of the concept. I believe a business plan could be worked up for tunnels and bridges to some of our islands including Whalsay and I also believe that funding could be secured. The tricky part is who will pay for the borrowing though, not who will lend. In Faroe and in Norway tolls are a critical piece of the overall funding jigsaw and one that I don’t believe much has been said about here. The upside of this model is that once the fixed link is paid for the tolls stop – typically after 15 to 25 years.
If I use the Vagar tunnel as an example then the toll is around £10 each way for a car rising to £35 each way for larger vehicles. This is based upon the cost of the tunnel when it was built in 2002 and the expected level of traffic. We can assume that the traffic level is high given that this is tunnel between Torshavn and the island with the airport on it. Indeed, traffic levels have been higher than expected meaning that the final payment is imminent and the tunnel will soon be toll free. It’s unlikely that traffic levels to and from Whalsay would be as high as this and the cost of a tunnel completed sometime around 2030 would also be higher. These are significant factors that affect the cost and viability of any proposal.
The other assumption made is that the council could use its ferry funding to fund borrowing. Sadly, this is only partly true. Roughly half of the funding for ferries comes directly from the Scottish Government with the remainder being picked up by the Council through its General Revenue Grant – arguably money that should be spent on other council services.
A discussion was had with the Scottish Government some years ago where this proposal was put but the answer then was that they would only provide funding for ferries and they weren’t interested in leaving that funding in place should we opt for fixed links. Hence, a very big hole in any potential funding plan, and our recent efforts to persuade Transport Scotland and the Scottish Ministers of the benefits of fixed links and their obligation to fully fund island links. There’s also a question over whether tolls would be allowed or not after the removal of tolls from all of Scotland’s bridges. While no tolls may be an attractive proposition for islanders, it makes any funding proposal less attractive to any public body that might otherwise seek to finance it.
This leads me on to the wider issue of risk. The technical and financial risks of tunnelling are high. One tunnel near Bergen saw not one but several tunnelling companies fail when, in spite of thorough surveying, unexpected conditions were encountered. Such risk is far too high for Shetland Islands Council to bear. Any project would have to be underwritten, if not undertaken, by government and while I’m not precious about which government, the Scottish Government would seem to me to be the obvious one.
You’ve stated on numerous occasions that the council rejected an offer of loan funding from the Norwegians – in truth the council has never been in a position to accept an offer – that’s not how it works. It would be strange days indeed if it were the case that anyone could bring an idea to the council and expect them to pay for it on the basis that loan funding was available. The normal rules of procurement dictate that public bodies decide to do something then run a procurement exercise – not the opposite way around.
It’s also been said that the council dispensed with the services of a tunnel expert. Again, in truth, the council never committed to any lasting arrangement with any individual or company in order for any contract to be to terminated.
Moving on to the issue of Symbister harbour then many of the same risks exist. You say that the capital cost could be recouped through harbour dues. I don’t dispute that it could be, however those dues would be largely, if not wholly, dependent upon the success or otherwise of any proposed fish factory. I expect that the factory might want its own cast-iron commitment from local fishermen that they would land in Whalsay – not least given the fact that, in spite of Ian Napier’s excellent report detailing the abundance of fish around our islands, past enterprises have failed and existing processors often struggle to get enough fish.
I don’t believe in what I call the “Field of Dreams” scenario where “if you build it they will come.” And in this case not only would a fish processor have to come but they also have to stay for many years in order for the council to recoup its considerable investment in infrastructure. Once again, if someone – a fish processor or a syndicate of fishermen perhaps – was willing to underwrite or provide guarantees for such an investment then there might be a different response from the council. However, in the absence of such a guarantee then there’s no way that the council could consider this to be “prudential borrowing”. In those circumstances we would be unable to satisfy our external auditors at KPMG or our most critical auditor – the wider Shetland community – that this investment was a good one.
This isn’t just a personal opinion but a simple fact that the council cannot borrow to invest without a reasonable certainty of return. It may have been different in the past but that’s how it is now.
Notwithstanding all of the above why, if this is such a good idea, is the council being asked to contribute at all? Apply for a works license and don’t let us hold you back.
John Tulloch
I assume there’s some mistake here, Gary? Far from “laying out plans on your dining room table”, I’ve never been to your house, indeed, I don’t even know where it is.
John Tulloch
From above comment: “Notwithstanding all of the above why, if this is such a good idea, is the council being asked to contribute at all? Apply for a works license and don’t let us hold you back.”
Er, Gary, you are aware,… aren’t you, it’s the SIC’s harbour in Symbister you are talking about?
John Tulloch
Gary, more facts wrong!
According to ‘Visit Faroe’, of their 19 tunnels, only the two subsea ones have charges. Regular users travel for £3.40 per return.
The rate you quote, £10 each way is, in fact, £11.50 per return, not £10 each way and applies to occasional, not regular use.
http://www.tunnil.fo/english/
Gary Robinson
1. My response was to Mr Polson’s comments not yours John.
2. Mr Polson’s proposal is for a quayside outside Symbister harbour so my comment stands.
3. I’ll give you that one. I was misinformed. But whatever the price the principle still stands.
John Tulloch
Ok, Gary, I’m picking up that you wish to abdicate from council control of the Symbister Harbour area.
Will you be ceding that back to the Scottish government, along with the ferries and fixed links?
WIll you be bragging about any of this in your election address, next May?
Ali Inkster
” Roughly half of the funding for ferries comes directly from the Scottish Government with the remainder being picked up by the Council through its General Revenue Grant – arguably money that should be spent on other council services.
A discussion was had with the Scottish Government some years ago where this proposal was put but the answer then was that they would only provide funding for ferries and they weren’t interested in leaving that funding in place should we opt for fixed links.”
So what you are saying here is we would have fixed links but for holyrood. The same holyrood that built a bridg0e to Skye and made it toll free, And still du thinks we ir well served be dem.
James Watt
“The same holyrood that built a bridg0e to Skye and made it toll free. And still du thinks we ir well served be dem.”
Would that be the Skye bridge that was completed in 1995, before there was even a prospect of a Scottish parliament and had a toll for nearly 10 years before it was scrapped?
Ali Inkster
The point is they made it toll free for the western isles, but won’t pay for fixed links for wis.
James Watt
“The point is they made it toll free for the western isles, but won’t pay for fixed links for wis.”
Then perhaps you should pick a better example than the Skye bridge, considering the construction wasn’t paid for by the government but using PFI, and that it was at one time meter for meter the most expensive road in the world with tolls 14 times that on the Forth crossing which is twice the length.
Ali Inkster
Maybe du should pay attention James, as I’m alwis said we wid be far better aff clear a da lot a dem, holyrood/westminster/brussels, dey aa tak a hell of a lot mare fae wis is dey will ever return. An still some folk tink dat gaen cap in haund ta dem will get wis onything wirthwhile.
Ali Inkster
I nearly forgot, the same holyrood that pays 100% of the cost of ferries in the western isles.
Alec Priest
It is very interesting that the Faroe tunnels cover 100% of the build cost in 15 – 25 years with the fares at £10 each way (or as John has pointed out, £11.50 return).
It should be noted that Yellsound took in £981,000 in fares 2015/16 and the gross operating cost of the Yellsound service 2015/16 was £5.8 million. A return trip to Yell for a full car (car + three passengers) currently costs £28.90, making it £14.45 each way.
In Faroe a fixed link fare costs £10 each way covers 100% of the build cost.
In Shetland a ferry fare costs £14.45 each way, covers 0% of the build cost and less than 17% of the operating cost.
You can see why things will need to change. If the Scottish government is bullying the SIC down the road of ferries over the preferred option of fixed links, restricting the economy and peoples lives, we really need to think if being part of Scotland is the best thing for Shetland?
Gary Robinson
Alec, maybe you’d like to point out where it was that I said that tolls covered 100% of the build cost?
I was pointing out that if you use the Norwegian or Faroese model for funding subsea tunnels then there’s a big hole in the business case if you’re not able to apply all of the ferry funding currently available and you’re unable to charge tolls.
Nobody is being bullied down the road of ferries. In fact if you read what I said then you’ll see that this council has taken tunnels further forward than any other council has ever managed to do.
Alec Priest
Gary, I would like to point out that I didn’t say that you said anything about the payment of the tunnel. I was pointing out that it was interesting that the Faroese can pay for their tunnels in the space of 15 -25 years on the tolls that are currently 40% of the current SIC ferry fares.
As to not being able to charge fares, that is not the case Gary, I assume you are referring to the “Abolition of Bridge Tolls (Scotland) Bill”, if you take time to read the bill, it clearly states that it is abolishing of fares is on the Tay and Forth bridges only, it does not say that any new bridges/tunnels cannot be tolled.
It would be nonsense to think that any major infrastructure project would be toll free. Given that the 2015 movement figures for Yellsound were 261,027 passengers, 124541 cars and 11760 commercial vehicles, it is clear that there is enough tolls to cover the cost of the tunnel.
If the Scottish government is willing to pay millions a year for the operating cost of ferries and tens of millions every few decades for each ferry replacement, but not pay for the more financially viable tunnel option? I would say again, that the Scottish government is bullying Shetland into having a more restrictive infrastructure than is preferable to Shetlanders. Time we showed a bit more backbone and pointed out how wastefully ridiculous they are being.
The big hole in the business case for tunnels is not the lack of ferry funding, it is the fact that some SIC officials decided, again to dismiss (or not pursue) a quote from a Norwegian company that has visited the site, done an initial geological survey and planning to build the Whalsay tunnel and connecting infrastructure for £60 million (2016 prices)! Instead the SIC decides that £214 million is the more appealing option! And you want us to believe the figures are not being manipulated in favour of ferries?
I’m not criticising you or any of the councillors who have been fed bogus information to vote on. Things need to change in Shetland, we need a reliable infrastructure that cannot be affected in the coming years of government spending cuts.
David Spence
Alec, it would be an interesting exercise for Nicola, to prove Scotland does indeed have total and 100% sovereignty over the islands……………….but without actually giving any evidence to substantiate such a claim………..lets call it an unofficial gentlemans agreement behind closed doors (which is not proof) lets say.
I am pretty sure if we were under the sovereignty of Norway or Denmark, fixed links between the main islands would have been achieved by now, and the islands would have been flourishing with all the extra income from Sullom Voe.
As they would say in Shetland ‘ Wur quite happy wae da scots ruling us……..We just dinnae want tae rock da boat, its joost nae da Shetland Wye aa dain tings ‘. lol
i tinkler
Gary Robinson, Political leader, Shetland Island council..”Notwithstanding all of the above why, if this is such a good idea, is the council being asked to contribute at all? Apply for a works license and don’t let us hold you back.”
The ultimate comment from our Shetland Council political leader.
Just thank goodness we have a new election soon.
John Tulloch
Gary, you talk about a tunnel being hypothetically “completed around 2030”. Why so soon, that’s only 80 years behind Faroe?
Why not go for 2050 and make it the full century? Then you could have a double celebration, invite the Faroese prime minister to open our first tunnel on the centenary of ours?
Gary Robinson
John, you’re right in so far as my comment was hypothetical. However, it was based on the typical time that the Norwegians and Faroese have taken to deliver a new tunnel – from the start of the planning stage until the day it opens – while factoring in the time it’s likely to take us to get to that start point from where we are now.
Alec Priest
Gary, you know as well as me that the Norwegians need 12 months notice to start and a further 3 years to complete the Whalsay tunnel. The only thing that can hold that up is delays generated by the SIC.
John Tulloch
Gary Robinson,
Councils may now borrow money by issuing bonds. Aberdeen City Council has a very good credit rating (AA2) has become the first council to do so.
Given this council’s financial prudence, reserves and close links with Aberdeen City Council, what is to hinder SIC from doing the same, providing a source of cheap, long term finance for major infrastructure projects?