Examination of witnesses (Questions 260
WEDNESDAY 27 JANUARY 1999
SWIFT and MR
260. My Lord, what proportion of your vessels
are registered in the United Kingdom?
(Lord Sterling) I am going to answer that within
a short statement, is that all right with you?
(Lord Sterling) First of all, we certainly welcome
the policy document and the Sub-Committee inquiry and, if I may
say, judging from the speech the other night this is the first
time that we have had a Government, in particular the Transport
Ministers, strongly supportive of this industry. It is the first
time that I can think of since I have been Chairman of P&O
that we have had that sort of support. There have been previous
reports. I was President of the Chamber of Shipping in 1990 and
indeed President for three years for the whole of Europe and I
think you might possibly have seen that report. It was a joint
one. Very quickly on that it is just worth mentioning that it
actually says: "The working party concludes that British
shipping is a vital national asset and after years of contraction
the industry is well placed to take advantage of the upturn".
The important part is the recommendations that were made were
made literally almost ten years ago. It is very interesting that
although quite a lot, like on the MCA side, has been applied,
we are still miles away from getting that support at a particular
time. It is worth mentioning to you, just to give you a scale
of what it meant, in the interests of the UK economy, which is
our responsibility, the contribution in gross terms of invisibles
is about five billion which is more than most industries contribute
in this country. We reckon, and I certainly reckon, that if we
had been given the support at that time we could have doubled
that by the end of this decade. It has not happened but now we
have a golden opportunity. There have been other reports as well.
We are at a watershed. I think that for many of us who are totally
international and, listening to the comments beforehand, it is
global competition which is extremely strong, we are perfectly
fit to be able to take it on. We are at a watershed and I think
there is no doubt about it that if we cannot succeed this time
in getting the support then unquestionably some of our European
Union partners in Holland and Germany and other countries will
take the lead. A little bit like the City of London is concerned
what might happen with Frankfurt. We do not want to be in that
position. We are internationally competitive. Fifteen years ago
to tell you that we could take on the best of Germany and the
best of the Far East would have been daft but today we can out-compete
them, we can build ships as cheaply, we operate them more cheaply
and more effectively and we really do have an opportunity. In
our view, and I am not just talking about P&O now, I am talking
about the whole industry which I feel very strongly about, the
advantage of the tonnage taxof course one still wants to
have all the flexibility of the capital allowances because that
plays a key roleis much greater. It is going to give the
flexibility to build ships which, as somebody made the comment
before, we can fill with British seafarers when it is necessary.
We are an empire company, we have used foreign seafarers or, if
you want, empire seafarers for 160 years.
262. Do you not call them Commonwealth,
(Lord Sterling) Commonwealth, Chairman.
263. We have moved on.
(Lord Sterling) A little, somewhat. Therefore,
the tonnage tax will not just be a plus for the rest of the industry
apart from my own company. It is quite interesting that when you
sit in London people just look at their toecaps but the further
you travel abroad the more people feel the City of London is still
the maritime centre of the world. I know there are a lot of Greeks,
Norwegians and others and if our tax position changed, tonnage
tax in particular and everything else that they have and they
like living in London as well, you will find a very big increase
in the number of companies which will operate out of London. I
have no doubts about that whatsoever. Finally, just coming to
it on the economic benefits on the jobs side, when it comes to
cadets we are probably the biggest trainer by far. In the next
year or so with a tonnage tax we would be training at least 300
cadets a year. There is a role for the ratings at the same time,
not the old-fashioned style, pulling on ropes and swabbing decks
is part of yesterday. Sam McCluskie, the old head of RMT, said
that to me nearly ten years ago. Sam reckoned, and I totally agreed
with him, we have got to fast stream people now to become technical
petty officers as soon as possible playing their rightful role.
Finally on the jobs side, which I do think is important, you mentioned
something which I thought was very interesting. We are not just
training people for British ships. This is a high cost country.
If we can get people to add value to their own role British seafarers,
British officers, and indeed pilots, aviation, are still considered
elsewhere as the finest in the world and they are very, very much
in demand. We have a great opportunity to be able to create value
for people. It does not necessarily mean that it has to be our
own ships and I think that would be supported by my colleagues.
264. I think that is helpful, my Lord. I
have to say that I was very fond of Sam McCluskie but he did not
swab a great many decks for some years before he died. Could I
ask you again what proportion of your vessels are registered in
the United Kingdom?
(Lord Sterling) One-third of our fleet. We have
about 178, we operate 270 ships at sea and of that about 55 of
them are registered here. I just want to make the observation
that we are actively examining, as you asked and Mr Gray made
the comment, if tonnage tax is brought in in a sensible fashion,
and when I say sensible it has to be able to work and probably
the nearest is the Dutch system, how many ships we could actually
bring back, not just for this purpose but also to the actual red
duster itself which emotively, romantically, call it what you
want, still happens to be important to many of us. We think we
probably have sufficient within our fleet, depending on the basis
of the tonnage tax, where we can more than double our tonnage
on the UK registry.
265. That is very upbeat, Lord Sterling,
very encouraging. Along with Mr Kopernicki I would like to ask
you about your fleet because I think he said his was 50 per cent
and your's was one-third in the UK. Do I take it, Lord Sterling,
that the one-third is UK-based and not second-based in the Isle
(Lord Sterling) No.
266. Mr Kopernicki, what specifically are
the advantages of the Isle of Man? You mentioned safety, high
standards, quality, stability and so on. What specifically attracted
you to the so-called second register of the Isle of Man and not
the UK Register?
(Mr Kopernicki) There is one particular issue
at the moment, to give an example. Under the UK rules, it is not
possible to put officers on your ships who are not certificated
in the UK or in some other very specific certificate countries.
The Isle of Man takes a more generous view about it and I would
not remotely suggest that it is lackadaisical, far from it; they
are very strict, but they permit you to use other nationalities
and, as a result, you can create competitively costed crews which,
in our case, have a high proportion of British officers as well
as others from other nationalities. Now, we cannot do that at
the moment in the United Kingdom.
267. I am a lay person, which I am sure
you appreciate, so are you suggesting that the ability to have
that flexibility with officer appointments, and you did not mention
ratings, is the critical factor in your registering 50 per cent
of your tonnage on the Isle of Man? That seems a little difficult
for someone like me to appreciate. I can appreciate tax, National
Insurance, all of that, but it is a little difficult to understand
that because of that one element it is so important.
(Mr Kopernicki) Well, the other issues are also
quite relevant. There is the National Insurance benefit if you
look at the technical details, and there are some minor taxation
benefits, but there is actually a shortage in the world of high-quality
officers for the sort of specialist ships and we operate not only
oil tankers, but we operate one-fifth of the world's LNG, liquefied
natural gas, carriers and we need a very highly-trained officer
cadre, so we do not have the luxury of a multitude of officers
we can pick from, but we actually have to go searching for them,
so we need the flexibility.
268. I am very interested in this business
of nationality because you are not saying that you need that flexibility
because other nations are better trained than the British then?
(Mr Kopernicki) Quite the contrary. We are very
proud in marketing both our ship management and also as a company
we man ships for others with British officers. In the Far East
we man LNG carriers for others and one of the points that is noted
by the customers in those countries, and it is a business for
us, is the high quality of training and the confidence in the
British officer cadre that we bring on to the ships of those countries.
269. Because these must be both high-cost
ships and high-cost cargoes? This is not cheap.
(Mr Kopernicki) They cost $200 million a throw
and are very technically specialised.
270. So are you then saying that those technically
trained officers are not available in sufficient numbers in the
United Kingdom? Is that what you are saying?
(Mr Kopernicki) Yes, we are short of officers
with the appropriate skills because we train them, like Lord Sterling,
and we have 140 cadets in training today, 40 odd a year going
in, and we have had that for many years, but we of course have
a leakage because we train for others and people get tempted away.
That is life and we are reconciled to that and we remain committed,
but we grow our own, we grow a substantial number of our own and
our customers know that they have a cadre of people who have been
right through the Shell school, have all our safety training,
all the courses that we offer and that inspires confidence in
271. I wonder if I could just ask Lord Sterling
basically the same question. You said that about a third of your
company's fleet is registered in the UK, but any in the Isle of
(Lord Sterling) No, we did have, but not now.
272. Why not? You see the point? If the
attraction for Shell is such as we have heard, one presumes it
would be attractive to you too.
(Lord Sterling) Well, we have parts of our fleet
overseas as well with the Bermudan and Hong Kong registries and
again, exactly the same as Shell, we prefer with assets of that
size, one feels comfortable, it may be slightly old-fashioned,
having British officers in charge of an asset like that.
273. But not the Isle of Man?
(Lord Sterling) Not specifically, but we did have.
We did have our tank ships there which in actual fact we sold
recently. The point on the Isle of Man side is that Shell do have
a specialist position where other companies are not necessarily
quite in the same form and Mr Everard will obviously make his
274. We will come to Mr Everard in a moment.
He is being very patient.
(Lord Sterling) If I could make the point, I think
that part of this is slightly historical. Many of us are offshore
for a key factor and that is cost, competition because, without
deluding oneself, otherwise you are dead and we would not even
be sitting here today. I think that part of it was that the MCA,
as it was, was completely out of date. I remember a particular
example, Madam Chairman, which was when we bought in one of our
ships and we wanted to switch it on to the UK Register and this
a French-built ship, built in Chantiers d'Atlantique, one of the
finest yards in the world, it had French fire-fighting equipment
on board which was acknowledged to be better than British, but
it had not been cleared and, therefore, we had to change it and
it cost us about £100,000 or something or other for the honour
of changing it. I remember specifically the case and I said that
this was absolutely damned ridiculous that we were in this position.
Under the leadership now of Maurice Storey, who is now heading
it up, and the way things are moving, and Captain Marchant who
is behind me, I would unquestionably say that things are changing
quite rapidly for the better and a lot of the flexibility that
we have gone abroad for, we will come back if that clears without
275. Well, we have had a lot of evidence
about Mr Storey and we will undoubtedly be commenting on that.
My Lord, of your 300 cadets or 400 in future, how many of them
are UK cadets?
(Lord Sterling) All of them. They would all be
276. You talked about foreign-flagged ships,
but is it correlated that these ships will have foreign staff
or do they have British staff? A more general question is what
proportion of staff do you have that are foreign against those
who are UK residents?
(Lord Sterling) Well, to give you an actual figure,
we have some 4,000 officers and 15,000 ratings, of which 2,600
officers are British officers and 4,800 ratings are British.
277. I want to come on, if I may, to Mr
Everard. You have been very quiet and well-behaved there and I
would not want you to think we have forgotten you. What proportion
of your vessels are registered in the United Kingdom?
(Mr Everard) It is three-quarters of our business
are registered in the UK. In fact the reason we actually first
flagged that was that when we bought some new ships, some second-hand
ships, one of our competitors had recently bought a similar ship
and the MCA made them do things precisely in the way that Lord
Sterling has said and we were not going to spend money unnecessarily.
278. Things like fire-fighting equipment?
(Mr Everard) Exactly, yes. They were not type
approved, although they were just as good or even better on the
equipment, but I think things are going to change there; I have
a good feeling on that.
279. Yes, I think things are changing. Can
you tell us a little bit about numbers. Do you train yourself?
(Mr Everard) We have got about 20 cadets in the
system at any one time.