Conclusions and recommendations
1. It
would be possible to bring the tonnage tax regime into compliance
with the new state aid guidelines by making only minimal changes,
which would benefit the Exchequer. It would be wrong to do so.
We support the Government's approach, which will allow a wider
range of vessels to qualify for the regime, and look forward to
the inclusion of these changes in the next Finance Bill. (Paragraph
24)
2. We welcome the
Government's decision to ensure that the penalty for early exits
from tonnage tax does not apply to tug operators who no longer
qualify for inclusion in the tax. (Paragraph 26)
3. We were surprised
that the Inland Revenue had not investigated how other Member
States interpreted the state aid guidelines to provide support
to their shipping industries (Paragraph 28) and that it had not
carried out such an investigation during the course of the review.
We recommend it does so now. (Paragraph 28)
4. Our predecessor
Committee recommended in 1999 that the Government should consider
as a matter of urgency "how to end the anomaly concerning
the non-application of Foreign Earnings Deduction to British seafarers
engaged in the short-sea and coastal trades". It is vital
that the UK maximises its support for the shipping industry within
EU rules. (Paragraph 29)
5. The draft clauses
for the Finance Bill give the Treasury the power to make regulations
prescribing periods within which companies may make an election
to tonnage tax. We support this. The tonnage tax has been successful
so far; there may well be scope for allowing further elections
at some point after 2006. (Paragraph 35)
6. Couples now have
more freedom to marry where they wish. It seems illogical to exclude
ship board weddings from the general relaxation of the law relating
to places of marriage and we recommend that such weddings should
be legally recognised. (Paragraph 37)
7. The Committee considers
that the shore-based maritime sector should do much more to support
training for its future manpower requirements. (Paragraph 41)
8. We are extremely
concerned that the level of unplanned payments in lieu of training
suggests a high drop out rate among cadets. DfT must establish
some hard facts about the training carried out by tonnage tax
companies. We need to know: (Paragraph 49)
- The effect of tonnage tax on the number of trainees
on UK registered vessels;
- What proportion of tonnage tax funded cadets
really do fail to complete their training;
- The reasons why cadets fail to complete training;
- How the MTT fund can be used most effectively.
9. The
Government was responsible for introducing the tonnage tax scheme
and including a commitment to training. It must now monitor the
effectiveness of this link in ensuring that the UK has the skills
it needs. It cannot delegate responsibility for commissioning
such research to others. The first tonnage tax cadets are just
completing their training. The DfT must, as a matter of urgency,
put in place mechanisms to find out how they are employed once
trained. (Paragraph 55)
10. The Committee
agrees that the Government should not unilaterally alter the terms
of the tonnage tax, which is a ten year contract. Nonetheless,
it should be possible to make changes as new companies come into
the regime. (Paragraph 58)
11. The Committee
believes that it should not be beyond the industry and Government
to devise an employment link which is acceptable to both sides.
If it becomes apparent that tonnage tax companies are not offering
positions as junior officers to their cadets we recommend that
the Government consider refining the scheme so that participation
in the tonnage tax regime is linked to providing employment and
training to higher certificate level. The surplus in the training
funds suggest that this could be done in a way which imposes no
extra costs to the shipping industry, but we should not forget
that tonnage tax offers real financial advantages to shipping
companies. (Paragraph 62)
12. We welcome the
decision by the DfT to publish a comprehensive annual list of
the number of active UK seafarers. (Paragraph 67)
13. We welcome the
Government's decision to include the consideration of proposals
for a training commitment for ratings in the expanded Terms of
Reference of the Shipping Task Force. The Committee considers
that there is a pressing need for information on what companies
in the tonnage tax regime are doing to honour their commitment
to ratings. Without this it is difficult to disagree with the
RMT conclusion that "the vague commitments to review the
numbers of ratings employed and employ more highly trained ratings
in technical posts has unfortunately amounted to virtually nothing
in terms of industry commitment." (Paragraph 68)
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