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

Memorandum by M R Tedder (P 40)

  Thank you for the letter of 5 April, which has been of great help to me. As you suggested I would now like to summarise what actually led me into writing to you. Before doing that I feel it would be helpful to start with a brief history of the events that occurred within the Port of Dover that have brought us to where we are today.

  In the late eighties with the Channel Tunnel opening looming the Dover Harbour Board (DHB) decided on a program of diversification to offset predicted losses on cars/passengers as well as freight. The instrument of this was to be the development of Deep Sea Cargo, the handling of fresh fruit and vegetables, activities that were run by my employer. The first of the facilities at the newly created South Jetty Cargo Terminal (SJCT) were opended in late 1989. This in my opinion created a partnership between my employer and the DHB that worked so well that we increased throughput by 150 per cent within five years with the certain prospect of even more growth to come. We now come to a point that I am certain has provided the catalyst for the majority of the problems the port is now facing. The DHB made a decision to stop all meaningful investment in cargo operations and divert all resources into a second cruise terminal. Overnight the DHB had effectively dissolved the partnership that had proved such a success, with my employer, making virtually all investments it had made in plant, staff and years of marketing useless. The question this raises to me is what would have happened to the DHB if they had acted in such a way in the real outside commercial world? The end result was inevitable, customers and shipping lines that had been loyal to the Port and had worked with us and DHB to develop facilities and cargoes suddenly received clear signals they were no longer wanted. The prime example of this is when a customer ship owner of many years standing is told his vessel cannot discharge on the dedicated cargo berth he had helped to develop because it was required for a cruise ship.

  The first Cruise Terminal was both a success and good investment for the port. The same cannot however be said of the second, which within the port directly completed with cargo for investment, and with related work has now swallowed some £25-30 million of precious port development resources. One cannot deny the second cruise berth was needed but where the decision is shown to be flawed is the fact that it was designed as a cruise only berth. What we now have is a port offering annually 730 cruise berth slots and is attracting only around 110 cruise vessels per year. One question to be asked is that now the ports cruise business would appear to be going into decline, even at this early stage in its existence, how many times in a year will both cruise berths be required to work in tandem. Other free days they would of course be available for cargo vessels. In addition when you consider that both cruise berths will be empty from October to April, the very time when cargo activities are at their height, you can no doubt understand the annoyance and frustration that this berth was not developed as a dual cruise/cargo facility. The port would have had the best of all worlds, including year round revenue. At this point it should also be noted the amounts other ports looking to get into the cruise market have spent on facilities. Harwich and Copenhagen for instance have recently spent around £100K each?

  It is now a matter of record that Cruise business in the Port of Dover is in decline. We now appear to be in a situation where the DHB has opted to reject developing a proven traffic-Cargo-that the port had successfully developed and replace it with cruise. The problem is that history would seem to be proving both decisions were wrong. To compound this even further it could be questioned as to whether recent decisions and actions by DHB towards cargo operations have been made in a way that could be considered to limit its capacity to operate efficiently and thus survive. One could also argue and see how such a scenario would be advantageous to the DHB given what has happened.

  It is this sequence of events that has led to my firm conviction that mistakes had been made. These effect the future viability of the Port. I therefore set out on what has proved to be both an interesting and disturbing journey to discover who can hold Trust Ports in general as well as their Trustees and Managers accountable for their actions. Armed with the knowledge that the recent White Paper "Trust Ports a Guide to Good Governance" had the issue of accountability at its heart I thought there would be little trouble in at least having the issues I raised dealt with in an open and honest manner. How wrong could I be? It would appear that despite this much-heralded Government Document true accountability in the Trust Power sector is nothing more than an elaborate illusion.

  On 7 May 1999 I wrote to the then Minister-Glenda Jackson-raising the above issues and others such as the Actual Constitution of the DHB and its general operating ethics towards cargo operations. This letter was neither acknowledged or answered.

  On August 26 I contacted, by letter John Presscot who by then had taken over responsibilities for Trust Ports. Here I related to the £3 million overspend on the new Cruise Terminal—this has risen to £5 million—against the dramatic fall in cruise business while also making various observations caused by the ever increasing number of lorries using the port and subsequently local roads. The letter was referred by Mr Prescott's office to the DETR who replied on 3 September stating that the "Government had no locus to investigate and no powers to intervene" and putting such responsibilities in the hands of the Ports auditors.

  I replied on 4 October asking the DETR to investigate the way DHB had handled cargo development even suggesting a site meeting. It was at this point I wrote to our local newspaper who printed my letter in their 21 October issue. Here I was highly critical of the DHB and damage it was about to inflict in respect of job losses in the port and its effect on the local community. I related this to the amount of money put into the Cruise sector that could not be recouped even in the foreseeable future. Recently announced redundancies, with more to follow next year have proved how right this observation was. I received a reply from the DETR dated 22 October. This letter in general confirmed that the DETR had no locus in regulating any commercial decision made by the DHB but could not take these issues forward as I requested confidentiality for myself as I still worked within the dock area. The fact this caused a problem surprised me. How many such incidents have been investigated with those requesting such action being given anonymity?

  I wrote back to the DETR on 10 November and among other matters asked who could actually investigate DHB decisions and hold them accountable for any that were proven to be wrong. They replied on 26 November stating that as these issues were now in the press they would take up my areas of concern with DHB.

  With no follow up correspondence from the DETR on 20 February 2000 I again wrote directly to John Prescott. Here I dealt again with port operational and developmental matters and the overall issue of Trust Port accountability. I even reasoned that an Ombudsman would be better placed to monitor Trust Ports than a Government Department. The DETR replied on 27 March. Its content provided little that was new and offered no way of testing whether recent Port related development decisions were flawed in the long term.

  16 April found me writing again to John Prescott, as before the letter was passed to the DETR. They replied on 18 May stating it was not within their remit to investigate actual commercial decisions taken by the DHB and the Government had "no locus to intervene and no power to intervene". It would be up to the ports auditors to comment on such matters.

  I replied on 22 May asking how a Trust Port, that is set up by statute, could not be investigated by the Government of the day and ultimately questioned, as a result if the DETR had any useful role to play in this area?

  The DETR wrote back to me on 1 June. They did not challenge any of my observations or comments but advised they had sent all relevant documents to the DHB for them to deal with.

  So began a series of correspondence with the DHB. We exchanged opinions and ideas as to the ports future developments. There is much to be considered in these letters but two items stood out above all the others. Firstly the DHB conceded that it could be 15-20 years before the second cruise terminal might recover its costs. This I understand is well outside the accepted time limits that Trust Ports should adhere to when projects are considered against expected return. I have always wondered what original write off time was presented to the Ports Trustees to gain their approval for the second terminal. The second item is a little unusual to say the least. In his last letter to me the Chairman made the point of mentioning that I had previously worked for the DHB. This is true but it was in a minor position for six months in the late sixties. As I said at the time should I be worried or flattered that the DHB appeared to have checked my past so carefully, or, was I getting a little too close to the truth for some individuals. Enlightening as these exchanges were it still moved me no closer to establishing who Trust Ports were actually and ultimately accountable to.

  It was at this point I wrote to the Public Accounts Committee (PAC) as I had assumed that Trust Ports finances would be regarded as Public Funds given their very existence was dependant on an Act of Parliament. In my letter of 29 November to the PAC over five pages I dealt with, reviewed and asked questions relevant to the issues I had previously raised. I offered statistical information comparing how cargo could have developed in relation to cruise. I also asked again for guidance as to whom Trust Ports were actually accountable to. Their reply of 15 February gave various technical information and advised that accountability for Trust Ports was entrusted by Parliament to in this case the DHB itself, or the appropriate Minister.

  We appeared to have arrived at the point where accountability would rest either in the hands of the very party, DHB, whose judgement should be tested. This option of course would make them both judge and jury for any complaint against them, can this be right or logical? The alternative is to write to the Minister responsible who we established will probably hand the matter to the DETR who, by their own admission have no power, to intervene or investigate in any real or meaningful way.

  With this apparent anomaly of accountability before me on 5 March I wrote to the Speakers Office setting out the problems I had encountered asking for help and guidance on this matter. After what I can best describe as brief but to the point exchange of correspondence the second letter I received of 27 March referred me to both you and the Sub Committee that was looking into "Opportunities and Development prospects at Major Ports". This resulted in my letter to you of 3 April and your reply of 5 April.

  I would like now to list various questions and issues related to this subject that I feel should be either answered or addressed.

    1.  Is their any real accountability in the Trust Port sector?

    2.  Has the White Paper on Trust Ports actually improved accountability or become an instrument to maintain the status quo?

    3.  Would an independent Ombudsman for Trust Ports not offer a better chance of accountability?

    4.  Should Trust Ports resources be regarded as "Public Money". If not, why not?

    5.  Even at this early stage should the second cruise terminal be regarded as an expensive failure?

    6.  How can DHB state it may take 15 to 20 years to recover its cruise terminal investment when Trust Port investment guidelines seem to indicate a time scale of around seven years?

    7.  What was the debt recovery time given to the Trustees when approval was sought for the second terminal?

    8.  In the light of the substantially reduced numbers of vessels using this new facility can the investment in the second stand alone cruise terminal be regarded as nothing less than speculative?

    9.  The ultimate given aim was to attract some 200 to 250 cruise vessels a year. Was this figure ever achievable or used by the Port Managers to sell the second terminal to the Trustees?

    10.  Were all the port stakeholders properly and fully consulted over the second terminal? Is it possible that if this had happened those stakeholders who have to live and operate in the "real" shipping and financial world would have been able to provide arguments that could have blocked the Ports Managers ambitions and desire for this second cruise only terminal?

    11.  How does the amount spent on the second cruise terminal stand up against recent investments in other ports trying to attract the very same business?

    12.  Would the DHB, even in hindsight, concede that the port would have achieved "Better Value" if the development had been on a dual cruise and cargo basis?

    13.  Has the DHB been negligent in the way it has lost the potential of developing cargo activities in Dover?

    14.  Is it possible from the way cargo has been treated it could be perceived that the DHB had been slowly trying to make it almost impossible for it to operate on a financially sound basis which in turn could result in its closure? This of course would have conveniently covered up any potential errors in judgement they had made in relation to these activities.

    15.  Did the DHB enter into a development partnership with cargo interests. The DHB have a statutory duty to the Trust, do they not also have both a moral and financial obligation to a party they had encouraged to invest in a project and then leave them facing heavy losses, or even complete closure, just because they chose to just walk away?

    16.  Would not one of the DHB original options of transferring cargo to the Western Docks and swapping cruise to the Eastern Docks, where cargo is located, been a better financial and operational decision?

    17.  Has the decision by DHB to put all its financial eggs into the failing cruise basket been the main element in its present financial predicament?

    18.  Did the Chairman have copies of my correspondence circulated to both the other Trustee members of the Board as well as its Auditors? If this did not happen, given their contents, maybe he should explain why?

    19.  Should the Trust Ports top managers have effectively what is a job for life? Would contracts that were reviewed every five years be more appropriate? In outside industries this would be about the length of time executives who operate at high level will stay at a company before they need a new challenge for their skills.

    20.  Is it not possible that if the Board of Trustees itself contained a majority of individuals with both shipping and port management experience a more meaningful debate over the potential and long term viability of the second cruise berth may have taken place?

  I trust you will find this an accurate summary of events while bearing in mind that all of what is contained in this memorandum is supported by the documents sent to you with my original letter.

  Let us remember, when I started this journey I was concerned for the future of myself and work colleagues employed both within my own company and directly by DHB as well as the future development prospects of the port itself. Since my first letter of May, 99 jobs have been lost in all areas of port life with prospect of more to come from DHB next year.

  What I seem to have found is a world where accountability as advertised is nothing but an elaborate illusion and questions that are asked are often never directly answered or just ignored all together.

  It is my hope that you will find this is of interest to your Sub Committee in its present deliberations though my feeling is that when these issues are fully considered it may be felt that they should be the subject of a totally separate investigation.

M R Tedder

17 April 2001

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