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


Examination of witnesses (Questions 180 - 201)

WEDNESDAY 27 JANUARY 1999

MR DAVID COBB, VICE-ADMIRAL SIR CHRISTOPHER MORGAN, MR JOHN LUSTED and MR MARK BROWNRIGG

  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.

Mr Stevenson

  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 cabotage there?
  (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?

Chairman

  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 substantially.

Mr Gray

  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 concerned—or more particularly being ordered, ships are being ordered all the time—we 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 fleets.

  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 tax—we 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 right?
  (Mr Cobb)  Yes, we are indeed.

Chairman

  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 that.
  (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 1,200 target.

  199.  Twenty-five per cent of our existing numbers?
  (Mr Lusted)  Indeed, but it does require the whole package.

  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.

Mr Stevenson

  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.

Chairman:  Gentlemen, you have been very tolerant, we are very grateful to you, thank you very much indeed.


 
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