I believe that the last time an undertaking under the Highlands and Islands Shipping Services Act 1960 was debated was in December 1964, when my right hon. Friend the Member for Kilmarnock (Mr. Ross) sought approval for a draft undertaking relating to the North of Scotland, Orkney and Shetland Shipping Company Limited.

A great deal has happened since then, as the Minister has pointed out. We have had the 1968 Transport Act, Section 34 of which enables local authorities to subsidise ferry services. We have had the May 1971 Gaskin Report, and, above all, the Secretary of State's own major review of shipping services and charges, to which the hon. Member referred. We should not lose sight of the fact that the most important changes which have taken place since then for the people in the Highlands and Islands are those affecting services, either because services have been withdrawn or because new ones have come into operation.

That brings me to the first of three brief points that I want to make. It may seem a simple platitude, but we should not forget that what matters are the services provided. When we get bogged down in talking about subsidies and what company structure there will be, we should not forget that the only thing which really matters to the local community is whether there is a service, whether it is of reasonable frequency and, above all, whether it is reliable and reasonably priced. Secondly, this draft undertaking is about subsidies. So often when we read the literature, when we look at the Scottish Transport Group's report and at almost anything to do with the subsidising of public transport we come across the idea that there is some virtue in commercial viability. I reject that totally.

In principle, I am in favour of the point of view taken consistently by the Highlands and Islands Development Board, referred to in its bulletin on Highland transport, monthly bulletin No. 4, when it was pointed out that in negotiations with the Government over several years the board had advocated a charging system that put the islands in the same position as distant mainland centres: that is, that sea links should be treated as trunk or principal roads and charges made in the same way.

I make the point to illustrate my belief that we should get rid of the idea that somehow building a road or providing a new harbour or facility is money well spent but there is something undesirable about providing an operating subsidy.

Thirdly, because of the immense importance and significance of oil finds around Scotland there has been, quite naturally, a rise in people's expectations. They expect the revenue which will come from oil to be reflected across the board. I am not referring to the specific issue whereby some developments—for example, the proposed development in Lewis—will lead to greater demand for shipping and air services and thus make them inherently more commercially viable. I am referring to the fact that this important economic activity is to take place and it should mean that the Government are prepared to make more revenue available for better services. It is not just a question of better services being provided to enable us to get the oil out. It is a question of the revenue being used to benefit islands such as Raasay and Berneray.

I turn specifically to the draft undertaking and confine myself to four questions upon it. The first relates to the overall subsidy towards David MacBrayne Limited. It is brought out clearly that David MacBrayne Limited is to be set up with a reduced subsidy, and that estimates of expenditure under the Act show that we are discussing a considerable reduction. The proposed figure for 1972–73 was £814,000. The reduced estimate for 1974–75 is £580,000. Can the hon. Gentleman explain what has led to this reduction? To what extent is it a withdrawal of services? To what extent is it a hiving off of local authorities and using the money from the 1968 Transport Act? I hope that the hon. Gentleman will tell us about the relative size of the capital and revenue grants envisaged under this expenditure in the next year.

My second specific point is that the draft undertaking makes it clear that David MacBrayne Limited will operate only "eligible" services, which is the same as saying services which will require support and which will not be making a profit. What does the hon. Gentleman envisage happening in the future if an eligible service becomes commercially viable? Will it simply be transferred to Caledonian MacBrayne Limited, or shall we have the spectacle of private operators being allowed to take over a service which has been made viable by the public purse, no doubt as a result of substantial investment encouraged by the capital grants?

I hope that the hon. Gentleman will be a little more forthcoming about the Secretary of State's reduced control over the charges. I understand the hon. Gentleman to say there will be a greater degree of flexibility for the operating company to modify charges. I like to think that the Government's overall objective will always be to keep down these charges. Does the hon. Gentleman envisage a situation in which, if there were fairly substantial increases in costs which the company could justify, it could raise these charges at fairly short notice?

It seems a little arbitrary to seek to achieve a situation where, as the hon. Gentleman said, the cost per mile in the subsidised services will be rather similar to the cost per mile in the commercially viable services. How does the hon. Gentleman justify that criterion, which is arbitrary and depends how Caledonian MacBrayne Limited and David MacBrayne Limited are set up?

My fourth point relates to the curious expression used in paragraph 13 of the draft undertaking. It says: Without the written consent of the Secretary of State, the Company shall not and the Group shall so exercise its control over the Company to ensure that the Company shall not, conduct any transaction (whether or not with the Group or with any of its other subsidiaries) otherwise than on arms length terms. The phrase "on arms length terms" is a curious one to appear in the draft undertaking. Perhaps the Minister can explain what it means and why it has not been possible to use a more specific way of describing this state of affairs.

The Opposition basically support the Government's new policy as outlined in the reply of April 1972. We naturally want more and better services and more money spent on them. We believe that this should happen because or North Sea oil. We support in principle the Government's emphasis on modernisation and capital improvement. The Government have made quite a thing, justifiably, of the question of encouraging roll-on roll-off vehicle ferries to charge on the basis of vehicle length irrespective of load. We support that in principle. Has it been achieved, or are the Government still at the stage of encouraging the operators to do it?