Introduction of a free ferry on connections with less than 100,000 passengers Summary In a proposal for a revised national budget (RNB), the government proposed to set aside NOK 53 million for a number of ferry connections to be free. This is in addition to NOK 30 million that has already been set aside. In the proposal, a total of 13 county road connections in Nordland are mentioned, and several multi-edge connections are relevant for the scheme. The introduction of a free ferry has a number of uncertainties, including with regard to increased traffic volume and possible capacity challenges, distortions of competition, financing of the scheme, etc. which are discussed in the case. Background The ferry uprising in January 2020 put the price of traveling by ferry in focus, and this became a topic in both the media and politics. In the revised national budget for 2021, the Solberg government set aside funds to reduce tariffs by 25 per cent. In the state budget for 2022, the Solberg government proposes to set aside NOK 483 million to reduce tariffs. When the Støre government took over, they set aside an additional NOK 490 million for reduced ferry fares. This meant that fares were reduced by about 30 per cent, compared with January 2021. When the revised national budget was presented, additional funds were set aside for ferry connections with less than 100,000 passengers to be free. Issue Nordland County Municipality is Norway’s largest boat county, with as many as 23 county ferry connections. The proposal will thus have a significant consequence for Nordland County Municipality’s service offer, not only for the ferry offer, but also for several of the 21 high-speed boat connections. In the government’s proposal for RNB, the following connections are on county roads in Nordland mentioned as 2 relevant for free ferry: · Digermulen – Finnvik · Stokkvågen – Træna · Mosjøen – Hundåla · Igerøy – Tjøtta · Nordnesøy – Kilboghamn · Sund – Horsdal – Sørarnøy · Ørnes – Vassdalsvik – Mløysund – Bolga – Stø · Svolvær – Skrova – Skutvik · Nesna – Nesnaøyene · Stokkvågen – Onøy – Sleneset – Lovund · Jektvik – Kilboghamn · Tjøtta – Forvik · Horn – Igerøy The government has also made an overview of county municipal ferry connections with over 100 000 passengers annually in 2019, where parts of the connection have calls at islands or communities without a road connection to the mainland. In this overview, no county road connection in Nordland is mentioned. The government emphasizes that the list is not necessarily complete, and there may be other multi-border connections that are also relevant to the scheme. Nordland County Municipality has thus considered that the calls to Løkta on the connection Sandnessjøen – Dønna, and Austbø and Brasøy on the connection Søvik -Flostad are covered by the scheme, and that the county municipality will be allocated funds to make calls from these free of charge. The Government emphasizes that the overview is a starting point for the distribution of funds between the county municipalities and that it is up to the county municipalities to distribute the funds between their own ferry connections. Discussion The introduction of a free ferry has a number of consequences, many of which are subject to great uncertainty. There are also a number of unanswered questions about the scheme. Lack of full funding Nordland County Municipality has a significant expense with the ferry service today. Only about 25 percent of the expenses are covered by the ticket revenue. If free offers lead to capacity problems with a need for increased traffic, this could lead to significant costs for NFK. The county municipalities set their own tariff regulations. Nordland County Municipality has the option of having a zone surcharge on its connections, compared with the state regulations. This was done in its time to avoid cutting offers. The funds now proposed only compensate for the estimated revenues based on government regulations. If the proposed connections are made free of charge, Nordland County Municipality must itself find coverage that the zone surcharge constitutes. For the connections in question, this amounts to around NOK 7 million in 2022 and NOK 12 million in 2023. The experience is also that Nordland County Municipality has performed poorly when the funds to reduce ferry fares have been made earlier, as calculated loss of income is based on historical passage data. In 2021, the half-year effect was estimated at NOK 13.5 3 million. Of this, NOK 5.3 million was the zone surcharge. In the budget for 2022, the state underfunding is estimated at approximately NOK 22 million, of which NOK 8.4 million constitutes the county municipality’s zone surcharge. Real state underfunding is thus NOK 13.6 million in 2022. These are funds that the county municipality has had to find in its own budget. If the proposed connections are to be made free of charge, it is crucial that the state fully covers the loss of income in order to avoid that the implementation will have consequences for the county municipality’s other service offerings. Date of implementation In the proposal for a revised national budget, the government proposes to introduce the scheme from 1 July. This is considered to be an unfortunate time for several reasons. This is high season for holidaying Norwegians and foreign travelers in Nordland county. There is greater demand during this period, which could, among other things, lead to negative publicity for the new scheme and capacity challenges in the high season. In recent years, there have been several challenges with long queues in summer traffic, this has come even if you have extra supplementary vessels and more departures. The introduction of a free ferry just before the summer holidays may mean that more people want to travel by ferry during the holidays, which can mean long queues in several places. Short implementation time will also have consequences for lack of public information about the solution. In addition, it is expected that there will be many questions about the scheme from the public, which will lead to an increased number of customer inquiries during a period where holidays are taken. Consequences for traffic, other connections and high-speed boat traffic The Government’s proposal proposes that the scheme should include connections with fewer than 100,000 passengers in 2019. Several connections in Nordland are just below, or just above, this number and this can vary from year to year. year. There may thus be small coincidences that determine whether a connection is included in the scheme or not. With the introduction of a free ferry, it is not said what happens if the traffic increases so that the connection then gets more than 100,000 passengers, and whether this will mean that the connection will then be included in the scheme. It is natural to assume that the introduction of a free ferry will mean a significant increase in traffic. In several places in Nordland, commuters leave their cars and only travel as passengers on the ferry. These people will no longer have the same financial incentive to leave the car. In addition, the free ferry can lead to general pressure, with increased leisure and business traffic. This can lead to queues and again demands for more frequent departures. This can create challenges as there are limited available vessels that can be deployed with increased capacity requirements. It has not been clarified by the government whether the state will cover such additional costs. When some connections end up just above or below the limit of 100,000 passengers, this has consequences for business and the local population. Business in places like Herøy / Dønna will have a competitive disadvantage that you do not get on the islands where the passenger numbers are lower. The same disadvantage also affects the local communities where you only have a speedboat as an alternative. 4 Several places in Nordland have both a ferry and fast boat offer that complement each other. When the ferries are made free of charge, while nothing is done with the fast boat tickets, a natural consequence is that an increased proportion will use the ferries on these routes. This will result in a loss of income on the speedboat. These are consequences that have not been discussed by the government and it is unclear whether the county municipalities will be compensated for this loss of income. Lack of connections Today, Nordland County Municipality has two ferry connections that have not used the Autopass scheme as a payment model. Brønnøysund – Sauren and Solfjellsjøen – Vandve have been defined as high-speed boat connections, even though the connections are served by ferries. This has meant that they have not been included in the overview of connections that are relevant to the scheme. The county council has now recommended that these two connections should use the Autopass scheme and if a free ferry is introduced, these two connections should be included. In 2022, a total of approximately NOK 1.1 million has been budgeted in ticket revenues on the two connections. In order to avoid unreasonable difference schemes, the county council has advocated that the transport of vehicles on the two car-leading speedboat connections in Bindalsfjorden and Hadsel, respectively, is done free of charge, but that passenger payment is maintained. Participation A separate participation process has not been carried out in this case and the time frame for preparing a case for the county council has been very limited. The County Council’s assessment It is very positive that there is a government that wants to facilitate settlement and development along the entire coast. Free ferries will be a good measure to facilitate this. Nordland has a very varied ferry and speedboat offer along the coast, both in terms of access, offers and needs. It is important to facilitate increased housing and business development in all communities along the coast – not just the communities proposed in the free ferry scheme. This means that you have to look at both the ferry connections that have over 100,000 passengers, as well as the communities where speedboats are the only alternative. The county council understands that the introduction of a free ferry must be done gradually, and the proposal from the government is a big and correct step. It is assumed that the government in its work on next year’s state budget will both look at other ferry connections, as well as come up with similar measures that will contribute to reduced ticket prices for travelers by speedboat. The case highlights a number of challenges surrounding the introduction of free ferries on certain routes, including distortions of competition, capacity challenges and several other uncertainties. The county council assumes that the government takes these challenges into account in the further work of facilitating a good ferry and speedboat offer along the coast. The county council supports the proposal for a free ferry and therefore recommends that the mentioned connections, as well as Solfjellsjøen – Vandve, Brønnøysund – Sauren and the multi-edge connections to Austbø, Brasøy and Løkta be made free from 1 July, and that shipping on fast boat connections in Hadsel and Bindal be done free . This is on the assumption that the Storting agrees with the Government’s proposal. The introduction of a free ferry will have a number of financial consequences that are difficult to fully understand at the present time. It is important that these consequences are highlighted and that the county municipality is compensated for both the direct and indirect loss of income this entails. Consequences for Nordland County Municipality Economic and personnel consequences There is uncertainty about the financial consequences of the introduction of a free ferry, and especially the indirect consequences, such as increased capacity requirements, reduced speedboat revenues etc. To what extent this will lead to increased capacity needs and how large co-costs this can give Nordland County Municipality, more thorough analyzes are needed to map. Assuming that the county municipality is reimbursed for the loss of income according to the Autopass regulations and the county municipality itself must cover the cost of the zone surcharge, this will mean a financial consequence for the relevant connections in the order of NOK 7 million in 2022 and NOK 12 million in 2023. , marketing and follow-up of the measure. Other consequences Direct ferries will not have any other consequences, but if it means increased traffic, this could mean a need for increased capacity and increased climate emissions. The County Council’s recommendation for decision 1. Nordland County Council supports the Government’s proposal to introduce a free ferry. 2. In accordance with the proposal in the revised national budget, a free ferry will be introduced on the proposed connections, as well as Brønnøysund – Sauren, Solfjellsjøen – Vandve and the multi-edge connections to Løkta, Brasøy and Austbø from 1 July 2022. In addition, a scheme for free vehicles will be established on the Stokmarknes connections. – The hinterland and the Bindal Basin. 3. Nordland County Council requests that the county municipality be fully compensated for the implementation of a free ferry on the above-mentioned connections. This applies to both the scheme itself, possible increased capacity needs, as well as loss of income on speedboats. 4. Nordland County Council will clarify that the implementation of free ferries on certain connections entails a number of highlighted challenges that must be clarified.
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Fear free ferry will result in even longer queues – news Nordland
