The European Commission's investigation into the funding of Scottish ferries will look at hundreds of millions of pounds worth of subsidy as potentially-illegal state aids.

It also raises once again the possibility of the Caledonian MacBrayne network being broken up.

This is made clear in the commission's 34-page document which examines questions over CalMac routes subsidised by the Scottish administration all the way back to 1995 and, by implication, into the coming years. It also covers Northlink routes to Orkney and Shetland and could involve anything up to £500m in total subsidies.

Professor Neil Kay, the economist who repeatedly warned the Scottish Executive that its approach to tendering CalMac's routes was fundamentally flawed, says he has been "utterly vindicated" by its contents.

Raising the spectre of breaking up the CalMac network by questioning whether all the routes should have been put out to tender in one bundle, the EC paper says: "If it were to conclude that such bundling was not justifiable, then the commission would consider that the contract has not been awarded through a really open and non- discriminatory public procurement procedure."

However, Transport Minister Tavish Scott said that the commission could not have it both ways.

"When I met the transport commissioner he was crystal- clear that we had to tender the routes. The commission cannot now say it is reviewing ferry services for some reason it didn't think relevant three years ago. If it is, I would want Scottish taxpayers' money back," he said.