Examination of witnesses (Questions 280
WEDNESDAY 27 JANUARY 1999
SWIFT and MR
280. What would be the total numbers so
that we can evaluate your 20 against your main numbers?
(Mr Everard) Well, we have probably got about
80 officers on our tankers and about 50 officers on our dry cargo
ships, so 20 is quite a large percentage.
281. And you would expect to absorb all
of those. What sort of wastage rate would you get?
(Mr Everard) Well, the wastage rate depends an
awful lot. I think one of the problems which I have pointed out
in our own particular area is that we find it very difficult to
retain people now on the coast because they do not get tax relief
when they are trading up and down the coast, whereas they can
go and work for a foreign competitor and get tax relief. I actually
predict that in ten years' time the majority of officers trading
around the UK coast will be foreigners and not Brits because they
can come and work on the UK coast and get tax relief. We had no
Canadians working for us three or four years ago, whereas a quarter
of our officer complement on the tankers now are Canadians because
they get tax relief.
282. A quarter of them?
(Mr Everard) Yes.
283. So you are saying that if we extended
the foreign earnings deduction relief on income tax to those who
sleep on board ships for 183 days of the year, that would have
a direct impact?
(Mr Everard) Our marketplace for people is not
coming ashore because, despite what has been said, a lot of people
actually do like working at sea and they do spend their careers
at sea, a good core number. I do not want everybody to think that
they really want to come ashore because they do not. They have
a choice of either working for us on the coast or going and working
for one of our competitors here or a foreign competitor. If they
do not work on the coast they get full tax relief, whereas our
people do not.
284. So what sort of turnover are we talking
(Mr Everard) In senior grades we are talking about
a small turnover but in junior grades, working their way up, we
lose the majority of the cadets we train.
285. So you are, in effect, saying "we
are training, the young people come in, but because of the advantages
that they perceive elsewhere they go"?
(Mr Everard) Yes.
Chairman: I want to
ask you all do you train them to use a sextant but I am not allowed
286. Could I pursue this question of the
tax advantage. Is it an advantage to you as a company as well
as to them or is it only an advantage to them? Do you pay them
lower wages because of that?
(Mr Everard) That is actually a difficult question.
I would not want to speak for everybody.
287. Just speak for yourself.
(Mr Everard) I think, in fact, it makes the person
more competitive and more likely to stay at a lower level than
they would be if you did not have that there. It is actually quite
a difficult question to be too precise on. Yes, certainly, if
somebody is not paying income tax there is a big advantage in
somebody working at a lower level.
Mr Gray: The Chancellor
is currently in purdah and will be standing at the Despatch Box
shortly and no doubt will be listening carefully to what the Committee
reports on that income tax question. Similarly, absolutely central
to all the discussions that industry has been having with Government,
is the question of tonnage tax. I wonder if we could focus on
that just for a second or two. Would all three owners like to
say in relatively clear and public terms, because we are very
public here, how many ships you would bring back into the British
fleet if indeed the Chancellor produces something like the scheme
which the Chamber and the industry have been asking for? Would
you make a clear and public commitment to reflagging some of your
288. Well, Mr Kopernicki, who could resist
temptation like that.
(Mr Kopernicki) Well, indeed. We actually own
very few of the ships that we operate, we get them from other
people. Clearly if there is good economic logic, and I think it
is an important aspect of the tonnage tax, the technical aspects
of exactly what is offered is crucial in the decision making.
It is not a simple matter, as I am sure you are aware. Certainly
to the extent that if we do anything in the UK and that situation
pertained then we would look at it very favourably.
(Lord Sterling) We have already decided that we
will unquestionably bring ships back. There are certain ships
for which it is slightly more difficult because of the complex
tax structure, which is our cruise fleet out of America, but even
that we would consider bringing back if the tonnage tax was worked
out sensibly. When I say "sensibly", you can have a
sensible tonnage tax and by the time the Treasury Solicitors have
finished with it it may be unworkable or just hinder us on the
tax side. I would rather not get drawn, Chairman, and Mr Gray
do not take it amiss, but this is something that I feel in some
meetings which are going to be taking place next week with the
Treasury I am going to be discussing with the Deputy Prime Minister
as to what we will do. What we are trying to suggest is that it
is not just the old-fashioned "we will think about it and
maybe", I will commit what it will be and it will be very
289. My Lord, you are getting yourself in
a slightly difficult situation because this is a House of Commons
Select Committee and we have the right to insist, but if you are
going to be a good boy next week I might let you off.
(Lord Sterling) I am prepared to say, I do not
know how many members of the press we have here today
290. I was asking a particularly difficult
question and I was confident that you would not actually give
a number. I hope that it will not be only Mr Prescott but also
Mr Brown to whom you will be making representations.
(Lord Sterling) Exactly.
291. And Everards?
(Mr Everard) We have only a small number outside
and those tend to be the older vessels. What I would say is that
it would make a much better investment climate for the future.
This whole thing is not just talking about bringing ships back
and so on, it is about making us invest in new ships in the future.
Chairman: Yes, this
is important. I am sure that you will all bear in mind that even
if we allow you off in this particular Committee we will doubtless
keep you in mind for future reference.
292. Mr Everard, you are in a somewhat different
business than that of Lord Sterling and Shell. Where do you see
your main competition in business? Presumably it is not the long
haul routes, where is it?
(Mr Everard) We have got two particular bits of
competition. One is the coastal oil trade, which is still very
large, which comes to 35 per cent of all movements in maritime
mileage terms. One of our main competitors is the President of
the Chamber of Shipping, to whom you spoke earlier, as a shipping
competitor. The others are pipeline, rail and road. It is a different
sort of business.
293. I will come back to that if I may,
if the Chairman allows me. I would like to ask you about cabotage,
this old-fashioned term that seems to have gone out of fashion.
You may have been in the room when I asked about this earlier
on. The UK has had a policy for a long time of not implementing
cabotage and that is supposed to be the case elsewhere. Do you
find there are obstacles to your operating coastal business in,
for example, other European Union countries?
(Mr Everard) Things have changed an awful lot
over ten years because it was not just cabotage, trades were restricted.
For instance, you could not take a cargo of grain to Spain because
that was considered to be a strategic cargo in Spain. We have
done quite a lot of that since it has opened up. There are only
three countries in the whole of the European Community that have
really significant trades in the cabotage field which are Italy,
Spain and the UK.
(Mr Everard) Greece is actually quite small. It
is usually higher value stuff, it is not a lot in the bulk trades.
The value might be reasonably high but the volumes are relatively
low. So actually when we are talking about cabotage the UK has
the biggest single market as far as that movement is concerned.
Having said that, I think that is a good thing because a lot of
our trade is also going outside of the UK. If we had a closed
fleet I think we would be inefficient.
295. I am not talking about that, I am trying
to get some handle on whether you are reasonably satisfied as
someone at the sharp end that coastal business is open to you
in the European Union?
(Mr Everard) Yes, it is but there is not a lot
296. Okay. Last question: given that road
and rail are areas that you have indicated as competitors, specifically
do you think you would suffer in terms of disadvantage in terms
of those other land based modes?
(Mr Everard) I think this business of road and
how much it pays in taxation is always going to be a major issue.
What I would say is that the two big advantages we have which
need to be recognised are that our highway is free, water is free,
and also our damage to the environment, such as our efficiency
in terms of fuel efficiency, is very much better than other forms
of transport. Railways are very good but shipping even beats railways.
We are actually saying that these things should be recognised
in terms of Government policy. If you want environmentally friendly
movements shipping is actually a better form of transport.
297. I would not suggest to the Chancellor
that water is free, he might be interested. My Lord, you wanted
to make some comments?
(Lord Sterling) I was going to add to the point
on cabotage because I was involved in the negotiations when I
headed up Europe. 1999 is a particularly important year, that
is when it comes off. Cabotage certainly affects Michael Everard's
firm. We are now starting to be invited to see whether we might
be prepared to expand our ferry operations in other parts of Europe.
Many of them are nationalised companies, we are a private sector
company and they would like us to work alongside or even take
them over. As an example, now our cruise ships will actually be
able to go to two ports in Greece and other places which they
could not before. It is the whole basis of cabotage that things
do change. It is opening up. If there is any country which can
take advantage, because many of those companies are either absolutely
flat on their backs or still nationalised, it is Britain and we
hope to be able to do that in the coming year.
298. Mr Everard, you made the point about
the environmental advantages. How far would small changes in tax
regimes make it possible for you to take a lot of the freight
that now goes by road?
(Mr Everard) I think realistically we are only
talking about, at the most, a very small percentage of the overall
freight traffic if you are talking about a small change and anybody
can throw money at anything, but of course a few per cent off
the so-called increases that are happening will actually make
a substantial difference to congestion and other costs over the
years because there is no doubt that congestion and environmental
problems are going to get worse, so if we can just take a few
per cent of freight back with a little bit of help, and certainly
in the way that we described in the paper, I think this would
299. What really would you emphasise were
the most important tax changes that would help you to do that?
(Mr Everard) Well, in this paper we have said
it is not just tax.