This article appears as part of the Scotland's Ferries newsletter.

Calls have been made for £16 million of performance fines imposed on state ferry operator CalMac to be used to compensate islanders and businesses for the failing lifeline services.

It comes after Transport Scotland have been unable to account for all the projects that have specifically benefitted from the penalty pot that has been built up since CalMac won the contract for west coast lifeline ferry services in 2016.

The Scottish Government Transport Scotland agency, has previously stated that the money from the penalties, the details of which have in the past been kept under wraps, was reinvested in improving the resilience of the ferry network while ministers have used this to reject calls for compensation.

They say the penalty deductions are helping to offset the cost of the current £1m-a-month charter of the MV Alfred as an emergency vessel to support the west of Scotland's creaking island services.

But details of what other benefits there have been have been unavailable while it is confirmed that the money is not ringfenced which means that it might be used in areas other than improving resilience.

One response from Transport Scotland to The Herald said: "I can confirm that there is no list of projects to which performance deduction funding is subsequently allocated as they are part of the overall budget and not ringfenced for project work.

"As the performance deductions are not ringfenced they become available as part of the annual ferries budget in that financial year, and may be used for such things as towards the cost of chartering the MV Alfred."

State-owned ferry operator CalMac has been landed with a record £316,000-a-month in fines for poor performance in the wake of continuing concerns over the reliability of lifeline services.

The performance sanctions equate to a "staggering" 12 times the rate that was amassed in its first nine years in charge.

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Details of the penalties reveal that the Scottish Government-owned company has notched up £16m in performance penalties as it nears the end of the seven year contract.

It was further revealed that as of November, of 350 commitments made by the ferry company to enhance services, there were 31 that had not been achieved a matter of months before the ferry operator's current seven-year contract expires.

Meanwhile, some £100m has been spent on repairs for the entire ageing CalMac fleet in the space of just over three years, with £24.852m spent in the space of just five months to February this year.

It all comes as the Scottish Government considers providing an uncontested award of the contract to provide lifeline island ferry services to CalMac 'in perpetuity', making it a wing of government.

Before CalMac Ferries Ltd, a subsidiary of David MacBrayne Ltd, took the £1 billion eight-year contract under competition from the services company Secro, the penalties over nine years to September 2016 amounted to just £1.36m.

Nearly £5m in penalties have been imposed over the 15 months between October 2022 and December last year at an average rate of £315,578-a-month. Nearly £1m in fines have been imposed in the latest three month period from October to December.

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It had already been forced to pay out a record annual penalty of £3.088m in the year from October 2021 – an average rate of £257,338-a month.

Similar penalties have been made by Transport Scotland to ScotRail over its performance when it was operated by Dutch state transport firm Abellio – but the money was reinvested in improvements to the Scottish rail network such as upgraded waiting areas on the Edinburgh to Glasgow route.

As part of its contract management arrangements, Transport Scotland conducts a series of performance measures to assess ferry operators and penalties are imposed when they are not met.

It reports two of these – reliability and punctuality – to its senior management team.

Performance deductions are not made against reliability and punctuality measures when a sailing is cancelled or delayed due to a "relief event".

Relief events include adverse weather, tidal conditions, traffic problems and other issues of safety.

User groups have said the money should be used to compensate people and businesses who have suffered from years of ferry failure.

An estimated 500 residents, 200 cars, 40 vans and 20 lorries converged on Lochboisdale – the port which links South Uist to the mainland – in June last year to protest about how the island has been persistently hit by cancellations due to ferry breakdowns. It led to a rethink demanded by the Scottish Government on how islanders were affected by cuts to services.

John Daniel Peteranna of the South Uist Business Impact Group, which organised the demonstration that led to a public meeting's vote of no confidence in CalMac, said of the penalties: "It is a huge figure. Why is that money not being used to support the business community that is bearing the huge financial cost of the government failures trying to provide a lifeline ferry service."

The Herald:
Another ferry user group official said: "We have heard all the spiel about the money being used to support services but where is it? If it is not ringfenced all the words of supporting resilience mean very little."

The record annual penalties imposed in the last full year of £3.823,825 to September 2023 is nearly three times as much as was incurred in the first year of CalMac's current contract when it received fines of £1.234m.

CalMac Ferries had faced fierce competition for the contract awarded in 2016 from the controversial services company Serco, which controls the Northlink ferry service to Orkney and Shetland as well as the Caledonian rail sleeper service to London.

Some 18 of CalMac's 31 working ferries that were in service in 2021 and deployed across Scotland are now over the working life span of 25 years old.

The 40-year-old Isle of Arran which usually serves as the second Arran ferry in the summer, is second only to Isle of Cumbrae in a list of CalMac's oldest ferries. It has been the regular summer ferry on Argyll and Bute's Tarbert to Portavadie route, when it is not rerouted.

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Transport Scotland responded to the concerns through a statement they produced following revelations of the rise in performance penalties.

It said: “We recognise that every cancelled sailing can have a significant impact and continue to work with operators and CMAL to improve resilience across our networks. Regrettably, some communities have been greatly impacted and we fully appreciate the need to improve reliability and confidence in services.

“All the money returned through performance penalties is reinvested in improving the resilience of the ferry network. For example, penalty deductions are helping offset the cost of the current charter of the MV Alfred.

“Delivering six new major vessels to serve Scotland’s ferry network by 2026 is a priority for this government. We have invested more than £2 billion in our ferry services since 2007 and we have outlined plans to invest around £700 million in a five year plan to improve ferry infrastructure.”