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


Examination of witnesses (Questions 300 - 320)

WEDNESDAY 27 JANUARY 1999

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

  300.  What financial changes then?
  (Mr Everard)  Well, I think the one financial change is that there could be freight facilities grants which were more akin to water transport rather than the way they have been set up for railways so that can tackle the key cost issues as far as water transport is concerned. One of the other two areas is one of planning in that where you have a large movement of goods, I think it is very good to put a factory or whatever by water so that goods can come in and out by water rather than creating too inflows by road. Of course the other thing is that I strongly believe that if we really want to reduce long-term haulage in terms of long mileage, the 44-tonne lorry concession would be a major factor from ports, as long as the lorries were not allowed to go beyond a certain mileage. At the moment the 44-tonne lorries can go from Dover to the north of Scotland and if you actually took a ship, say, to Aberdeen and ran it across, you would save a lot of mileage.

  301.  Is there sufficient freight going by road at the moment to make a ship economic?
  (Lord Sterling)  Yes. We are the biggest operator in Europe and I can assure you that the freight which is moving backwards and forwards to Continental Europe, despite government statistics at the moment, is the biggest in its history and on our short-sea freight, it is absolutely massive. That is the real bedrock of our ferry operations.

  302.  Basically you are living off the backs of the lorries, are you not, but what I am more interested in is are there sufficient freight journeys, using the example of Aberdeen, and is there sufficient freight leaving Aberdeen each week, if you like, to make up a shipload or is it really so fragmented that really it has to be road transport most of the way?
  (Lord Sterling)  Sorry, we are the biggest ground transport and we are the lorries. It is our lorries which are the ones which are moving overland at the same time, so what I am saying is that with the sheer size of freight and the way it is increasing in this country, it has been tremendous over the last few years, and just as a passing point, particularly from the long-range areas, we feel very strongly that we are not in love with ships, lorries or otherwise, that is not our job, but our job is to move cargoes and the more we can get off the roads on to the railway systems, in my view, in the long term and indeed the waterways of Europe, and people forget that nearly 30 per cent of all goods still move by water, it is a remarkable figure when one sees it, so I see your point.

  303.  I am driving at the question as to how much more we can get back on to water in the United Kingdom and how far getting sufficient bulk-loads together really means that a lot of the smaller ports around Britain will never be viable.
  (Mr Everard)  I just mentioned Aberdeen because there are two new services which have started there, a container service and actually a trailer service. I would think setting up there is actually fairly marginal, but if you actually allowed those particular people to have 44-tonne loads, you actually increase the chances of that sort of business staying quite substantially because it makes a substantial difference, those extra few tonnes, and it makes a substantial difference to the economics of actually keeping those services going to Aberdeen rather than doing much shorter-haul traffic.

Mr Donohoe

  304.  Going back to the figures that you have used in terms of the UK ratings against that of foreign, what differential, if any, is there in terms of rates of pay?
  (Dr Swift)  Madam Chairman, we have very few UK ratings. Those that we do have are actually employed in very specialised trades, as you heard earlier from the Chamber, around the UK. We are in the international sector so that most of our ratings are indeed international and the figure you are looking for is about a ratio of three to one British to Filipino ratings.

  305.  So you would pay your British ratings three times the amount you would pay others?
  (Dr Swift)  We only employ them, Mr Donohoe, within specialist vessels in the UK and on the rest of our fleet which is international we employ only international ratings.

Chairman

  306.  But the ratio is actually three to one?
  (Dr Swift)  The actual salaries that we would pay would be that ratio.
  (Lord Sterling)  The answer for us is that it is half or less than a half.

  307.  Mr Everard?
  (Mr Everard)  You will be surprised to hear, Madam Chairman, that we pay them the same.

Mr Donohoe

  308.  The only decent employer of ratings!
  (Mr Everard)  It is a different sort of market.

Mr Gray:  That is because you are almost entirely in British waters and the foreign crews are based here, whereas other shipowners are dealing internationally and that presumably is the reason for the difference.

Mr Donohoe

  309.  It sounds like an excuse to me!
  (Mr Everard)  Also, Madam Chairman, we employ very few ratings in comparison with officers. Officers completely dominate our cost structure.

  310.  Can I just ask the question then as far as officers are concerned: is there a differential between foreign officers and those that are UK-registered?
  (Mr Kopernicki)  Yes, there is. I do not have the numbers off-hand, but we can supply those. It is not as marked as for the ratings and it varies from country to country.

Chairman

  311.  For example, if you had a Canadian who presumably was trained to the same high standard, he would not necessarily be a cheaper investment, would he?
  (Mr Kopernicki)  No, it is very similar. The differences would be, for example, Filipino officers, just as an example.

  312.  And you could give us a breakdown of the numbers of your officers who would fall in that category and an approximate matrix of the difference in rates of pay?
  (Mr Kopernicki)  Yes, that is not a problem.

Mr Gray

  313.  I am puzzled. If you are paying foreign officers and foreign crews the same as you pay British officers and British ratings, why do you employ Canadian officers and crews and why are they not all British?
  (Mr Everard)  Because they will come and work for us if they get tax relief, whereas with our people, if we paid ours more, we would be in competition now abroad in the market.

Chairman

  314.  Is this the point of tax, that you lose the British nationals because they do not get the advantage that the foreign national gets when he comes to work for you?
  (Mr Everard)  Absolutely.

  315.  Lord Sterling, did you wish to add anything?
  (Lord Sterling)  I was just going to add that British officers employed offshore as a package will certainly be cheaper than they are onshore here, without question. Our Italian officers are probably paid about the same. Could I also add something which I think is important and we have not touched on it today, which is that we represent an industry which is economic, it is making profit for shareholders, it is perfectly good work and we have been expanding and, talking of P&O if you want, we are probably stronger now in moving cargoes in ships than we have ever been in our history, but we also, and have always accepted right through the history of our company and indeed on both sides with the companies here, we are automatically the fourth arm of defence. Now, I have been very heavily involved, and I am involved actively with the Royal Naval Reserve and during the Falklands, it was by volunteer crews and ships that we went to the Falklands. Indeed, there was a lot of stuff and nonsense talked about the Gulf and the capability and I was President at that time. The whole of the P&O fleet was already set to turn around when they originally thought that the Gulf was going to be mined, in which case the idea of taking ships up would have been nonsense and we would have turned around and done the whole job. Right through history, Shell and BP and others have always been a part, always on call, volunteer crews, so the point I would like to make, which I feel some of us feel about it, is that in order to do that, you must have quite a large number of British officers, or at least European Union officers and we think if there is any conflict in the future, if history repeats itself, they might have to be of that calibre, but there are times when certain countries are not prepared to support you. Indeed, when Canberra went to war at that particular time, the Indian Government insisted that all the Indian ratings came off. In fact they were scandalised because they volunteered and it was sort of injured pride, if you want, and fortunately we had ratings to go on. Therefore, I think still having British ratings, but now in a new role is going to be key for the future and unquestionably having British officers at a time like that available, and many of them in the Royal Naval Reserve, is something which we have always accepted as part of our role. It is nothing to do with the economics, but we have always been there and I think the industry is proud of the part it has always played.

  316.  I think that is helpful. Mr Kopernicki, do you wish to add to that?
  (Mr Kopernicki)  Madam Chairman, indeed I would echo the comments, but we are at the same time in an extremely competitive business environment and although emotionally we would like to maximise, for example, the British officer cadre for the reasons I have mentioned, these minor details of the current taxation regimes are very important. I would just like to say that the current regime is already very good news and the discussion about tonnage tax moves it further but not to forget there are some very useful instruments. I would echo Michael's point about the 183 day situation. There is an anomaly there for people who are working in or near UK waters, people keeping records as to where the ship was at that particular moment, whether it was in territorial waters or not. I think that could be easily cleared. They are nonetheless appreciated and enable us to employ large numbers of high quality seafarers. There is also a knock-on effect. Those seafarers do come ashore at a certain point and they then become experts. We then market those experts to other countries as consultants and that in turn brings other business because they then bring in a British engineering firm to supply parts to a project because that is their background, they naturally relate back to the UK heritage. There is quite an interesting little pull that is developed but this happens over time and it is also lost over time. We are very keen to build those elements.[2]

Chairman

  317.  Because all of you have made the point quite legitimately that British seafarers are expensive investments I want to ask you something simpler. As the world moves to higher regulation and tougher standards, as it will almost inevitably, is this not going to have a direct effect upon the sort of people you have to employ because when, for example, Japanese shipowners are prepared to say the difficulty about having Japanese crews is that they are too expensive and they move down to Koreans, and I do not know who comes after Koreans. Is it not clear that there comes a point at which shipowners will be faced with an overall cost of a high standard of training and general level of expertise? Will that not affect your attitude towards the cost of British seafarers? Or do you not expect international rules to get tougher?
  (Mr Kopernicki)  I think that there are two issues here. First of all, some of the rules are already very tough and it is an issue of whether they are enforced or not. This school of thought suggests that if we could only enforce generally across all the shipping community the current rules we would have a much safer world. Yes, the demands of training are certainly there but then we are finding that a lot of other countries are meeting those demands. So we are not alone. There are some excellent schools in the Philippines, Croatia, many, many nations. We vet these against other international bench marks. It is quite tough competition. Britain can win in that competition but the economic skeleton key has to be there to open the door.
  (Lord Sterling)  First of all, talking about being tough on standards, not only are we totally supportive of it but on the whole the leading companies, safety being paramount, lead the charge on that front. There is also a misnomer. There is some suggestion that because we have been using the words "Third World crews" that somehow they are under the floorboards and they really are not up to much. That is a load of stuff and nonsense. Amongst the Portuguese, Filipinos, Ukrainians, Poles and so forth you have some of the finest seamen in the world. They are proud of it and they love it. Under the right management, which is the officers' corps, they develop into being extremely fine seamen. For example, since 1837 P&O has always had Commonwealth crews, to use your expression, Chairman, and they are tremendous, six, seven, eight generations right the way through. These will always be available. Again, I suppose some of these maritime countries will say exactly like us "we do not know whether we are going to do manufacture, we do not know what services will be going but there is one thing we do know something about and that is the maritime trade". We have to expect that will happen. If different economies start to come up and up and up and their costs go up so it becomes more costly that could well happen in ten, 20, 50 years' time, I cannot deny that, but at the moment I would have said that the companies represented around the table on this side operate to the highest possible standards in the world, we have top rate crews, highly trained and we pay accordingly in international rates to be able to have the best.

Mr Gray

  318.  Can I just ask one quick supplementary to that one. Presumably if regulations do toughen up in all of these areas with regard to training but also with regard to the ships themselves that will actually be of huge benefit to the British fleet because we are already achieving those standards which other fleets might not be.
  (Lord Sterling)  I totally agree with you.
  (Mr Kopernicki)  I think there is much more in that than people perhaps appreciate, if I may say so. There is a respectability about British examination of ships and things to do with ships which is extremely well regarded, more than we credit often.

Chairman

  319.  So it is very important that should be maintained to existing standards and work should be carried out by marine surveyors?
  (Mr Kopernicki)  And further developed. There is an opportunity there I believe. There is a reputational issue around the world if a surveyor comes from one of the organisations in London that we often choose to decry and I think that is erroneous. There is real opportunity to develop that further I believe.1[3]
  (Mr Everard)  All three of us market ourselves on the quality of our ships and the quality of our crews. I think it is a major factor.

  320.  Good. You did at one point in your evidence talk about special support. What have you got in mind?
  (Mr Everard)  I was talking more about getting transport back on to water more than road, that was the point I was making. Just to make a general point, I do actually think if we are really going to turn British shipping around we must not just do one thing, we must look at the package and really take it forward. Unless we do have an overall positive environment I think the industry will not expand in the way that a lot of us would like to see.

Chairman:  Thank you. I think on that note I should release you because you have all been very tolerant. We are very grateful to you all, thank you very much indeed.


2   Note by witness: For the avoidance of doubt, the existing 183 day tax exemption for seafarers is an important and valued element of the current fiscal framework for British seafarers and shipping, indeed an essential one. Back

3   Note by witness: The point is that British consultancy expertise, for example surveyors, is very well regarded in many parts of the world and provides a potential growth opportunity. Back


 
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