Examination of witnesses (Questions 180
WEDNESDAY 27 JANUARY 1999
and MR MARK
180. But do you think that is going to be
enough to meet the 1,200 that you are talking about as your target?
(Mr Lusted) I think it is a good start, but it
is obviously not going to be enough for the industry and the shore-based
industries as well, and one of the problems that we are faced
with is that a lot of the companies that employ British officers
do not recruit and train cadets at present.
181. How many British companies do train
and recruit cadets?
(Mr Lusted) Most of the British-based companies
do do some level of training, but something like 45 per cent of
all British officers are employed by foreign companies and they,
by and large, do not train British officers. We have got to persuade
them to pull their weight.
182. Do you think it is a career that is
attractive to young people?
(Mr Lusted) I think it is.
183. You have told us, for example, that
as soon as they get married, they want to leave. People get married
earlier and earlier these days if they are going to get married
at all, so would that not be a disadvantage?
(Mr Lusted) I think
184. There are some marriages which thrive
on not having one's husband at home, I must admit!
(Mr Lusted) I think we will not attract everybody,
but we will attract a proportion of adventurous young people who
like the thought of having responsibility early. They can be an
officer in charge of a watch by the time they are 19 or 20 and
there are a raft of good jobs at sea for them and then there are
employment opportunities ashore in excellent jobs and we can pitch
that at them and at their parents and their career teachers and
we do do that.
185. Just on cabotage very quickly. Would
you care just to advise us. The UK has a long standing policy
of not supporting cabotage, is that true of our European partners?
(Mr Cobb) I think it is becoming more so.
186. What about Greece and Italy for example?
Are they as open as we are? Are they saying "come and do
your cabotage"? Can Mr Everard go round Greece and do his
(Mr Brownrigg) Within the EU there are about five
countries, mainly around the Mediterranean, which still retain
some cabotage restriction but that is vis a vis non-EU
States. Within the EU those have all been opened except for
Mr Stevenson: How
does that work out in reality? How many UK coastal ships are in
fact allowed to operate around Spain, Italy, Portugal, Greece?
187. Do you have an answer?
(Mr Brownrigg) In reality it is mainly Spain and
Italy which have the large cabotage trades so they are the only
ones to worry about.
188. Could you briefly offer clarification
of what are the attractions of the so-called second register in
the UK to the Isle of Man. If I were a shipowner why should I
be attracted to register in the Isle of Man and not in the UK?
(Mr Cobb) Over a number of years there is no doubt
that the MCA, as we now call it, was difficult to deal with. There
is no doubt about it. From a superintendent or a captain's level
or a personnel manager's level, they have always been difficult
to deal with. The Isle of Man and Bermuda are just as strict when
it comes to safety of life at sea, just as strict when it comes
to the certification of people. But they make it easier to comply.
189. Why are MCA so difficult to deal with?
(Mr Cobb) They are vastly improved. The last year
has seen a major improvement.
190. Can you be a bit more specific, perhaps
a couple of examples where MCA have been difficult and are difficult?
(Mr Cobb) I think in the area of endorsements
of certificates of well-known other countries. For instance, the
agreement that a British flagship could perhaps have a Dutch captain
and the difficulties of having to get that person endorsed whereas,
the other way round, the Dutch are very happy to have a British
captain. It takes a very long time to get that done. It has improved
191. I thought it would be worth focusing
particularly, once again, on the question of the tonnage tax.
Broadly speaking it is a £360 million benefit over a certain
amount of time. I have two questions really. First of all, how
long will it take for the British fleet to increase as a result
of the tonnage tax if the Chancellor listens to your views? Secondly,
what would the cost be in the short-term with the market being
as it is today? In other words, taking today's market how much
would it cost the Chancellor in the first year and how long will
it be before a decent number of ships come back into the British
fleet as a result of tax?
(Mr Cobb) I will deal with the tax matter first.
If the tonnage tax is approved and at the level that now prevails
in Holland, then the cost to the Treasury will be a maximum of
£40 million to £50 million. As far as the new ships
coming on to the register are concernedor more particularly
being ordered, ships are being ordered all the timewe have
seen one of the largest companies, who you are talking to later
on, ordering two major ships this week. Investment in shipping
is an important matter and is going forward.
(Mr Brownrigg) That is a notional estimate. In
practice there is a substantial number of UK companies whose investment
profile is such that tax is deferred and from year to year they
pay little tax. That means the benefit to some of those companies
is more in a structural sense than in a cash sense. It also means
that in practice that nominal or notional assessment of cost will
be far less. In terms of the future of the fleet, the fleet will
stabilise as a result of this, which is important, and I am talking
of both the owned and the registered fleet. We hope that they
will increase, we project that they will increase, particularly
the registered fleet. The concept of an option of a tonnage tax
in our proposal has no link to flag but we do see a practical
result which will see an increase in both the owned and the registered
192. In simple terms, if the Chancellor
in his Budget in a couple of months' time has the proposal which
is in the White Paper, and which you endorse, for tonnage taxwe
are seeing P&O, Everard and Shell shortly would you
expect to see them bring a significant number of ships back into
the British fleet? We are talking turkey here, not just a bit
of a subsidy to shipowners, we are talking about something that
will make a substantial difference to the British fleet, is that
(Mr Cobb) Yes, we are indeed.
193. Over what period of time?
(Mr Cobb) I think it will start immediately. You
will see the action coming through quite quickly.
194. I want to ask you gentlemen, if I may,
a little bit more about this SMART scheme because you did slide
rather rapidly over the effects. The SMART scheme, the taxation
and the National Insurance regimes, these changes you think are
going to be enough to make sure that the 1,200 cadets is a target
that can be met. Is that your case?
(Mr Cobb) I am going to pass that to John Lusted.
Let me say first that you should be aware that if we are successful
with the tonnage tax there is a linkage between the tonnage tax
and the training of deck and engine officers.
195. In as much as some companies do none
at the moment?
(Mr Cobb) Some companies do very little, some
companies do more than their fair share. If a company chooses
to go down the tonnage tax regime that company will have to accept
a level of training that it must meet. If it does not meet it
it will pay a levy into the Maritime Training Trust.
(Mr Lusted) I think the President has really made
the point that I was going to.
196. Presidents have a nasty habit of doing
(Mr Lusted) They do, yes. We envisaged a package
of measures, including the measures that you mentioned and the
tonnage tax. The tonnage tax would come with a training commitment
and would be a powerful lever towards encouraging companies to
train more. If we got that package we are convinced, and we have
given an undertaking in the joint working party with the Government
and the unions, that we will see rapid increase in the number
of cadets recruited and trained.
197. How many ratings are we talking about?
(Mr Lusted) I was talking essentially of officers.
198. Let us talk about officers. How many
officers are we talking about?
(Mr Lusted) We are talking about a 25 per cent
per annum increase and that would very rapidly get us up to the
199. Twenty-five per cent of our existing
(Mr Lusted) Indeed, but it does require the whole
200. So it could not be done with just encouraging
the training schemes, you are saying it has to be tied in with
an obligation to train as well?
(Mr Lusted) That is how we see it. The major lever
is the tonnage tax.
201. Can I ask on this package element because
the Netherlands has been quoted often. As I understand it they
do not just have a tonnage tax, they have a favourable national
insurance regime and I think they have a requirement for vessels
to be Dutch registered and manned by Dutch crews or something
like that, it is not just tonnage tax, there is a number of elements
here. They appear to have been very successful in attracting people
to flag in that flagged out and have generated not only their
shore based industries but also their activities. We have talked
a lot about tonnage tax but are these other elements equally as
important or are they not relevant to the UK?
(Mr Brownrigg) I think the entire package is important.
The Dutch experience is a very useful one. In the three years
since it has been operating a net gain has happened to the Dutch
register of 120 ships and up to 40 maritime businesses have either
expanded hugely or started in the Netherlands. There are also
knock-on effects in Dutch ship building. The proportion of the
orders placed in Dutch shipyards by Dutch shipowners has increased
by 50 per cent in that period. Not only that, over that three
year period the volume of orders placed by Dutch owners in Dutch
yards has multiplied by five. You can see there are impacts both
in the shipping sector and in the related industries.
you have been very tolerant, we are very grateful to you, thank
you very much indeed.