An historic agreement setting the Isle of Man Steam Packet Company on a new course for the future is due to be signed next month.

The Sea Services Agreement (SSA) will come into effect in January 2020 and last for 25 years, with a review and potential amendment every five years.

The SSA replaces the previous User Agreement but has the same two parties - the Steam Packet and the Department of Infrastructure. What is different about the new arrangement is that in addition to regulating the company via DoI, government is now also its owner, via Treasury as shareholder.

The SSA aims to strike a balance between supporting the island’s social and economic needs and protecting the company’s commercial viability, so that it remains a profitable business and does not end up requiring a public subsidy.

But with regular opportunities for lobbying and political intervention, is it realistic to think this balance can be maintained beyond the short term?

There has already been a concerted call for cheaper freight charges, for example. This type of pressure will intensify whenever there is an opening for political influence, and MHKs may find it hard to resist.

It is just under a year since Tynwald’s landmark vote to nationalise the Steam Packet in May 2018. Support for the move was virtually unanimous, but in the absence of a clear policy rationale members were able to hold divergent and incompatible views as to why it was a good idea.

Some, rather naively, saw it simply as a sound investment in a successful enterprise, forgetting the evidence of history that government ownership tends to make a business less profitable.

At the opposite end of the spectrum other members looked forward to the company serving the people and the public interest.

The DoI seems pretty good at getting on with things these days and it lost little time developing the new Sea Services Agreement, including a period of consultation, which helped it identify the island’s social and economic needs.

These and other issues are set out in a comprehensive report from the department accompanying the SSA’s heads of terms, which received unanimous backing at the March Tynwald.

The report explains the provision for a ’strategic re-set’ of the agreement every five years, taking into account changing circumstances. Where proposed adjustments do not increase overall costs for the company, it is required to implement them.

However, if government wants changes that do impose additional net cost on the company, the DOI has to pay the shortfall. Thus the apparent profitability of the Steam Packet would be protected, but at the expense of the department.

On passenger fares the report says: ’The public consultation identified a widespread perception amongst stakeholders that passenger fares are high, despite a number of investigative reports which suggest prices for passenger/car transport appear to be very competitive with other ferry operators on routes of a similar distance.’

Nevertheless, the SSA will bring improvements on passenger fares, including more special offers, no weekend supplements outside of the summer months, and a freeze on special offer prices for foot passengers.

On freight charges the government is sticking with the status quo, noting that a big drop in fares during a period of cargo service competition in 2010/11 was not passed on to the consumer. A study by the Department for Enterprise has concluded that most of the additional cost of freight is absorbed by large UK retailers operating national pricing policies.

Meanwhile a report for the DoI from shipping consultants Thames Head has confirmed there is a ’dilemma’ for government now that it owns the company:

’As a shareholder the government might wish to increase the profits of its business and maximise the returns to the exchequer (in turn providing funds for other activities which contribute to the other social and economic needs of the island).

’Alternatively it could use control of IOMSPC to ensure: lower costs for freight and passenger interests, including island residents; improved services to generate higher visitor numbers to the island; business is encouraged to move to the island and create jobs there due to better or cheaper transport links.’

The sensible solution, as the consultants conclude, is some form of ’trade off’ between profit and the public interest. But given that the balance is likely to shift over time, where will it settle? Will profit be so eroded by the public interest as to lead, eventually, to a net subsidy situation?

According to the old laws of political physics, elected representatives are more likely to be moved by short-term popularity than by long-term prudence.

The first ’strategic re-set’ of the Sea Services Agreement is due to happen in 2025, one year before a general election to the House of Keys.

It will be difficult, if not impossible, for members to stand clear of the review process, which will attract lobbying from various economic interests and on behalf of local residents, for whom the cost of travel remains one of the major downsides of island life.

And, although the final version of the SSA is not subject to Tynwald approval, it will be very hard to keep amendments to it out of the court.

The fact of government’s ownership of the Steam Packet creates a legitimate public and political interest in the company that cannot be denied by pretending it is still a private business.

If MHKs end up voting on ferry fares and schedules just ahead of an election this is bound to warp the review process in favour of changes that will please voters.

If that happens every five years there will be no profit left in the company and the government’s legacy on sea services will be a large liability.

But perhaps this is too cynical and pessimistic a view, harking back to the bad old days of populist antics in the House.

Today’s MHKs do seem more sensible and responsible, generally, and there has definitely been an improvement in collective behaviour since the last election.

Is this a permanent transformation? Or are inexperienced members still learning the laws of political physics?