SERCO has won a £345 million contract to run ferry services to the Northern Isles, prompting outrage from union bosses.

The Scottish Government has agreed to freeze some fares for three years as part of the deal which means Serco NorthLink Ferries will continue as operator.

Transport union RMT reacted furiously to the announcement, describing Serco as “a failing empire of private profiteering” that should be “nowhere near” public services.

The contract, which Serco estimates will make £450m in revenue over the first six years of the eight-year contract, will begin on October 31 and be followed by a “package of fare reductions” for islanders from January. The firm also vowed to introduce smart ticketing and improve terminal facilities in Kirkwall, Orkney.

Islands Minister Paul Wheelhouse announced cabin prices would be reduced by 20% between Aberdeen and both Orkney and Shetland.

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The Scottish Government has also committed to freezing fares for passengers, non-commercial vehicles and cabins on those routes for the next three years.

Wheelhouse said: “We have placed our island communities at the heart of the new contract and as preferred bidder, Serco are making some exciting new customer-focused enhancements.

“These include an extra 10 premium cabins on the Aberdeen-Kirkwall-Lerwick routes, a full refurbishment of the terminal lounge at Hatston, earlier boarding at Aberdeen harbour and extended opening hours of NorthLink’s customer services centre.

“The new contract also reflects the Scottish Government’s commitment to the Fair Work Framework, providing pension protections and security of employment for the staff involved in the delivery of the ferry services.

“It is important to remember that Scottish ministers will retain control of all of the key issues such as fares and timetables through the public service contract and I look forward to continuing to build on our strong working relationship with Serco NorthLink Ferries in the months and years ahead.”

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But RMT general secretary Mick Cash claimed the decision “is a political handbrake” on the move towards publicly-owned ferry services.

He said: “This is a retrograde step and a disgraceful sell-out of passengers, workers and taxpayers interests in favour of Serco, a failing empire of private profiteering that is dismantling the NHS, profiting from asylum seekers and defrauding the taxpayer.

“They should be nowhere near public contracts like the lifeline Northern Isles Ferries.”

He added: “Cheaper fares and ports investment on the NIFS ferries are funded by the Scottish taxpayer and the five passenger ferries and freight vessels on the contract are publicly owned.

“This decision is a political handbrake on the move toward the publicly-owned and operated Scottish ferries network that RMT will continue to campaign for, in the interests of our members and the communities they are a part of.”

Orkney LibDem MSP Liam McArthur cautiously welcomed the announcement, saying it would allow for continuity in the delivery of the lifeline service.

But he added: “While greater flexibility in how existing capacity is used may be helpful in some circumstances, the clear message from key business sectors in both Orkney and Shetland over the past year is that additional freight capacity is desperately needed.

“It will be important, of course, to consider the detail of this new contract, but already it appears there are some glaring omissions.”