Examination of witnesses (Questions 300
WEDNESDAY 27 JANUARY 1999
SWIFT and MR
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
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.
306. But the ratio is actually three to
(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.
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.
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.
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.
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.
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
(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.
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.
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
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
(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
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