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


Examination of witnesses (Questions 280 - 299)

WEDNESDAY 27 JANUARY 1999

LORD STERLING, MR PETER SMITH, MR JAN KOPERNICKI, DR PETER SWIFT and MR MICHAEL EVERARD, CBE

  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 about?
  (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 to.

Mr Bennett

  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 ships?

Chairman

  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 substantial.

  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—

Mr Gray

  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.

Mr Stevenson

  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.

  294.  Greece?
  (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 there.

  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.

Chairman

  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.

Mr Bennett

  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 help substantially.

  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.


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 1999
Prepared 8 June 1999