UNION leaders yesterday condemned a move by ministers to allow Caledonian MacBrayne to register hundreds of crew with offshore companies to avoid national insurance payments.

The Herald revealed last November that the publicly owned company was considering the switch to cut more than pounds -1.5m a year in costs so that it could win the Europeanwide tender to continue operating its 26 routes.

Potential competitors use crew from offshore firms that do not pay employers' 12% national insurance contributions.

Crews employed in harbours, estuaries and inshore waters, such as those working on the Clyde, do not qualify for the exemption.

But about 650 sailing to the Hebrides would, a saving of up to pounds -9m over a six-year tender period under new guidelines.

A parliamentary answer last week from Dawn Primarolo, the paymaster-general, seemed to indicate that offshoring would be against Treasury guidelines.

She said that government policy was that departments and non-departmental public bodies should not seek to minimise tax liabilities without genuine justification in economic terms. " . . . and should apply restrictions on the use of offshore jurisdictions by successful bidders to procurement contracts."

But the Treasury and the Scottish Executive now believe there is genuine justification. An executive spokesman said yesterday:

"Scottish ministers welcome the Treasury's confirmation that CalMac could, if it so wished, introduce offshore crewing arrangements, which confirms Scottish ministers' own understanding of the position."

Stephen Boyd, STUC assistant secretary, said: "We are treated to the grotesque spectacle of a state-owned company avoiding paying tax in order that it can compete in a tendering exercise that no-one in Scotland wants."

Research had demonstrated that tendering would be costly for the UK taxpayer, he said.

Fergus Ewing, MSP for Inverness East, Nairn, and Lochaber, and SNP transport spokesman, said: "Offshoring is being forced on CalMac by ministers' determination to proceed with tendering. This tendering, we should remember, is to justify to the Europe Commission the subsidy (pounds -28m in 2004/05) paid toa publicly owned company for providing ferry services to our most fragile communities "For CalMac to continue to serve these communities, they must now dodge paying national insurance to the Treasury, the Treasury which pays a block grant to the executive to fund such things as the CalMac subsidy. Does it make any sense?

A spokesman for CalMac said: "When the government announces it is going to put the routes out to tender, we will have to go down the road of offshoring, or be left in the position that we are unable to submit a competitive tender. But it will make no difference to our employees' conditions or pension rights."