Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence

Supplementary Memorandum by NUMAST (FUS 1B)

  I was extremely concerned to hear of the evidence presented on Wednesday 17 March to the Committee's inquiry into the future of British shipping. The apparent lack of consideration given by Treasury officials to the critical importance of the tonnage tax proposals is deeply disturbing. I hope the Committee's report will reflect the urgency of the need for change in the fiscal regime in which the shipping industry operates.

  However, my central purpose in writing is to set the record straight in connection with the evidence that was presented on the issue of seafarers' Foreign Earnings Deductions.

  In both the written and oral evidence tabled by the Revenue, it was stated that the FED arrangements had been introduced to provide "support for the use of UK crew on UK-owned deepsea vessels which might be of strategic value in time of war".

  I must emphasise that no such reference was made by the then Chancellor, Norman Lamont, when he announced the concession in the 1991 Budget.

  For the record, his statement read: "The Gulf hostilities have reminded us of the important contribution which our merchant navy can make to our defence. I recognise that there is a strategic case for measures to encourage shipping companies to draw their crews from seamen in the UK who would be willing and able to serve in time of war".

  The issue is of critical importance, given the problems caused by the anomalies in the existing FED arrangements. The intention of the concession—introduced as a direct experience of the Gulf War—was to encourage the recruitment and retention of seafarers. The sector in which they serve should be immaterial—not least because of the mobility of labour within the industry and the need to retain a "pool" rather than a limited cadre.

  I was also deeply shocked by the Revenue's statement that the strategic defence need "is currently far from pressing"—a comment that beggars belief, given the facts of the decline in the UK fleet and UK seafarer employment. Eleven years ago, the House of Commons Defence Committee concluded: "The availability of shipping for defence purposes is governed by three key factors: the number of UK flagged ships; their accessibility when they are needed; and the availability of a pool of British seafarers to man them. There are grounds for concern on all three counts." Given that the UK owned and registered fleet is now two-thirds the size it was in 1988, I am sure, from comments made by Committee members, that my concern on this point will be reflected in the report. However, I believe it is important for NUMAST to seek to ensure that evidence is accurate and based on fact.

Brian Orrell

General Secretary

18 March 1999

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