Memorandum by NUMAST (TT 01)
TONNAGE TAX
INTRODUCTION
NUMAST is the trade union and professional organisation
representing more than 19,000 shipmasters, officers, cadets, and
other professional staff working in the maritime industries at
sea and ashore.
We welcome the House of Commons Transport Committee's
decision to examine the issue of Tonnage Tax and to consider whether
the scheme is succeeding in increasing the number of vessels on
the UK register; increasing the number of cadets; and providing
ongoing employment to young officers, particularly under the UK
flag.
NUMAST strongly believes there are a number
of policy changes which could be made to make the regime more
effective and we urge the committee to consider our proposals,
set out in this written submission.
THE BACKGROUND
Throughout history, shipping has been crucial
to the economic and strategic well-being of our island nation.
In turn, seafaring knowledge and expertise has helped to shape
the fortunes of Britain, in war and in peace. However, over the
last 25 years of the 20th century, the British shipping industry
suffered a dramatic and drastic decline. During this period the
number of British-owned and registered ships (500gt and above)
dropped from more than 1,600 to fewer than 300 and the number
of seafarers serving in the UK shipping industry shrank from more
than 90,000 to barely 25,000.
This catastrophic decline prompted a series
of inquiries and reports highlighting the adverse effects of the
likely demise of the British shipping industry and the loss of
its maritime skills base. These included reports by the House
of Commons Transport Committee, the Defence Committee, the Employment
Committee, the House of Lords Science and Technology Committee,
and the Joint Working Party established by the Transport Minister
in 1990.
In July 1998 the UK government's White Paper
on The Future of Transport announced the intention of reversing
this decline, by developing a new shipping policy based upon a
long-term strategic vision of the importance to Britain of its
shipping and wider maritime-related industries.
This aim was repeatedly reaffirmed by the Deputy
Prime Minister in the following months as a year-long joint government-industry
working party drew up policy measures, set out in the subsequent
report, British Shipping: Charting a New Course, which
proposed 33 inter-related actions designed to develop the UK's
maritime skills by securing British seafaring employment and enhancing
the UK's attractiveness as a base for shipping enterprises.
The report's proposals were also supported by
the independent inquiry commissioned by Chancellor Gordon Brown
and chaired by Lord Alexander. The findings of the Alexander Report
paved the way for the introduction of the tonnage tax scheme,
and the associated measures that Mr Prescott promised would "put
Britain back on the maritime map".
IS THE
SCHEME SUCCEEDING
IN INCREASING
THE NUMBER
OF VESSELS
ON THE
UK REGISTER?
The tonnage tax has undoubtedly been successful
in delivering a welcome "headline" increase in "British"
tonnage. Between December 1999 and December 2003, the UK direct-owned
trading fleet (ships of 500gt+) increased from 493 ships of 7.16m
dwt to 527 ships of 14.94m dwt. Over the same period, the UK direct-owned
and registered trading fleet (ships of 500gt+) increased from
241 ships of 2.39m dwt to 316 ships of 5.71m dwt.
Membership of the tonnage tax scheme has also
grown sharply. Between 2001 and 2004 the number of companies enrolled
in the tonnage tax scheme increased by almost 40% (from 42 companies
to 67) while the number of ships went up by 30% (from 520 to 745
ships). The bulk of the increase was in the period 2002-03.
Disappointingly, UK-flagged ships have contributed
only slightly more than half of the tonnage tax-entered fleet.
Many UK-owned ships remain flagged in the Isle of Man, Bermuda
and the Bahamas and, indeed, at the start of 2004 just 38% of
total UK-owned trading tonnage was under the UK register, compared
with 29% at the start of 2001 and 24% at the start of 1999. According
to the DfT statistics of UK-owned ships, at the end of December
2003 UK owners possessed 649 ships of 15.0m dwt, of which 416
were registered in the UK.
While there were agreed reasons for keeping
the tonnage tax scheme "flag blind", the disappointment
at the relatively low proportion of British-owned ships within
the scheme is all the greater when it is recalled that, when the
policy was announced, P&O chairman Lord Sterling committed
his company to bring at least 50 ships onto the UK register—something
that alone would have increased UK-flagged tonnage by some 75%.
IS THE
SCHEME INCREASING
THE NUMBER
OF CADETS?
The government's maritime polices, as set out
in Charting a New Course, placed a great deal of emphasis on the
importance of maintaining seafaring skills in recognition of the
fact that ship operational expertise is the foundation of good
practice for any reputable maritime nation. Unsurprisingly then,
21 of the 33 action points set out in the document were aimed
at ensuring that the UK maintained a sufficiently large and highly
skilled maritime labour force.
The fact that senior officers are made, not
born, was well understood by the DPM, his advisors and, not least,
by the members of the SWG when it was decided to require enrolment
to the tonnage tax scheme be linked to the recruitment of officer
trainees. The precise requirement being that for every 15 posts
in the effective officer complement of ships (that is the total
officer number on ships plus back up officers for facilitating
leave) entered in the scheme, the ships' owner had to provide
training on a relevant course for not less than one eligible trainee
officer per year.
It was recognised that one for every 15 was
not a sufficient ratio to produce the number of cadets needed,
but was the ratio "negotiated" between the social partners.
To supplement this the Chamber of Shipping gave a "best endeavours"
commitment to achieve an overall total increase in cadet training
numbers of 25% year on year.
The need for such a link was starkly indisputable.
British officer cadet training catastrophically reduced during
the 1980s, leaving a huge "generation gap" in the country's
maritime skills base. A total of 2,315 cadets began training in
1975. This fell to 1,274 in 1980 and to an all-time low of 162
in 1987. The intake recovered slightly since then, running between
400-500 throughout the 1990s and when the tonnage tax was still
at the discussion stage in 1999, officer trainee recruitment was
in the region of 560 cadets per year (around 500 of which were
being trained through GAFT/SMarT).
Despite the training link with tonnage tax,
cadet recruitment since the scheme was launched has been disappointing.
The intake rose to 622 in 2002-03 and a provisional estimate of
620 in 2003-04. This number is barely half of the figure of 1,200,
reported in 1996 in a University of Wales study (commissioned
by the Department of Transport, the UK Chamber of Shipping and
the Marine Society) determined necessary just to stand still.
A 2003 update reiterated the earlier findings, but revised downward
the earlier estimate of the numbers needed because, the authors
argued, they had previously overestimated the attrition rate of
cadets in training. The 2003 study proposes a 6% annual loss,
compared with their 1996 estimate of 10% per annum.
NUMAST believes this highlights the fact that
there is insufficient substantial evidence of attrition rates.
Emerging evidence from an ongoing SIRC cohort study of UK cadets
employed by the three companies with the largest cadet intakes
suggests that attrition rates actually vary considerably from
one employer to the other and that the safest assumption of the
overall rate of loss is between 40% and 50% over the three-year
period, ie an averaged annual rate of between 14% and 17%. On
the basis of these figures, and using the University of Wales
1996 study's formula for calculating the required output, annual
cadet recruitment should be 1,680 using the lower figure of 14%
per annum loss, or 2,040 using the higher figure of 17%. Current
recruitment (as in 2003) at just over 600 cadets pa falls woefully
short of the 1996 estimate of 1,200 and is some 20% short of the
2003 revised downward estimate.
IS THE
SCHEME PROVIDING
ONGOING EMPLOYMENT
TO YOUNG
OFFICERS, PARTICULARLY
UNDER THE
UK FLAG?
Sadly, since Charting a New Course was
published in December 1998 there has been growing evidence that
the measures put in place to develop the industry's workforce
have failed to deliver the anticipated increases in British officer
recruitment and training—despite some very welcome growth
of the UK-flagged fleet and the number of non-UK flagged ships
entered into the tonnage tax fleet.
NUMAST believes it has become evident that the
"unique feature" of the tonnage tax—the training
link—has sadly failed to deliver a sustained enhancement
of British officer recruitment and employment, despite the substantial
increase in the number of ships entered into the scheme. Indeed,
over the past year in particular the officer numbers have declined
and between October 2001 and March 2004 NUMAST has had to deal
with the potential impact of more than 1,100 declared UK officer
redundancies (a figure that resulted in some 719 confirmed job
losses following negotiations between the Union and employers).
The failure of the tonnage tax training linkage
to provide sustained employment opportunities for British maritime
personnel is underlined by the steadily declining numbers of UK
officers employed onboard tonnage tax ships. DfT data shows that
in 2001-02, 69% of officers were UK-domiciled. By 2002-03 the
proportion had fallen to 58% and in 2003-04 had fallen still further,
this time to 49%. In just three years, therefore, the proportion
of UK officers fell from more than two-thirds to less than half.
Even more disturbing is the fact that the last
annual UK seafarers analysis produced by the Centre for International
Transport Management at London Metropolitan University indicated
a 14% decrease in the number of UK officers between 1997 and 2002.
Not only that, but the number of officers aged less than 40 also
fell by 15% in this period, which raises particular concern about
the long-term health of the labour supply trends. The analysis
pointed out that the detailed breakdown of the ages of the officers
examined in the research suggested that the increase in certification
between 2001 and 2003 "is more to do with the transfer to
STCW 95 than as a consequence of the tonnage tax provisions".
Against such a background, it is therefore important
to examine the supply and demand for officers in the UK and on
tonnage tax ships. This is particularly important given the significant
proportion of vessels in the scheme that do not operate under
the red ensign, but instead remain under flags including Barbados,
Bahamas, Germany, Antigua & Barbuda, Liberia, Panama, Hong
Kong, Norway, Ireland, Netherlands Antilles, Singapore, Japan,
Denmark, St Vincent, Marshall Islands, Netherlands and Luxembourg.
The DfT analyses of the crews of tonnage tax
ships offer only high-level aggregations. They do not differentiate
between UK-registered and other flag ships and make no analysis
by nationality and rank. The only available data on the nationalities
of the officer corps of UK-flagged ships is shown below in Table
1. This data, drawn from the 2002 global survey of crew composition
by Cardiff University's Seafarers International Research Centre,
estimates that some 48% of officers aboard UK-flag ships are of
British nationality and a further 21% are citizens of other EEA
countries—Poland and Latvia of the EU-accession countries
together providing 11%.
Table 1
ESTIMATED NUMBERS OF OFFICERS OF VARIOUS
NATIONALITIES EMPLOYED ABOARD UK-FLAGGED VESSELS, 2002
| Nationality |
Frequency | % |
| United Kingdom | 1,356 |
47.9 |
| Poland | 264 | 9.3
|
| Philippines | 213 | 7.5
|
| Canada | 111 | 3.9
|
| Ukraine | 90 | 3.2
|
| Russia | 85 | 3.0
|
| Croatia | 85 | 3.0
|
| Latvia | 80 | 2.8
|
| India | 74 | 2.6
|
| Norway | 66 | 2.3
|
| Denmark | 65 | 2.3
|
| Sweden | 56 | 2.0
|
| Indonesia | 53 | 1.9
|
| Germany | 49 | 1.7
|
| Romania | 38 | 1.3
|
| Barbados | 35 | 1.2
|
| TOTALS | 2,761 | 97
|
| | |
The position is even more stark than these statistics would
suggest. The "generation gap" caused by the massive
decline in UK cadet training during the 1980s has created the
situation in which the current officer corps has an extremely
unhealthy demographic. In 1980 the average age of UK officers
was 27. Today the figure is over 47. More than 80% of the entire
British seafarer workforce is aged over 35, compared with just
41% in 1971 and more than 73% of UK officers are aged over 40,
compared with 53% of the overall UK male workforce.
LMU's annual UK seafarers analysis shows how these trends
present disturbing medium to long-term implications for British
shipping and the country's maritime infrastructure. Quite simply,
even with the small but welcome recent increase in cadet training,
the numbers of trainee officers are inadequate to bridge the "generation
gap" and unless current trends are reversed the number of
UK officers is on course to decline by as much as 24% in the next
five years and as much as an additional 33% over a further 10-year
interval.
The SIRC figures also demonstrate the scale of these alarming
potential problems, as well as the increased "globalisation"
of the UK-flag maritime labour force. SIRC's research (based on
analysis of crew lists) showed that while some 70% of masters
on British-registered ships are UK nationals, the figure falls
to 54% for chief engineer officers, 37% for chief officers and
barely 33% of second officers.
The increasing use of foreign nationals as junior officers
on ships that used to have 100% UK officer manning is also demonstrated
by statistics showing the numbers of Certificates of Equivalent
Competency issued by the Maritime & Coastguard Agency. These
rose from 37 in 1997 to more than 2,000 in 2002 and total 6,097
over that period.
Not only does the increasing use of foreign officers erode
the UK maritime skills base, it also presents a wide range of
challenges to British shipping's safety record and international
reputation as a "quality" flag. In considering European
Commission proposals for the recognition of foreign seafarer certification
last year, the European economic and social committee pointed
to the "adverse effects of permitting third country nationals
to sail in unlimited numbers" on EU shipping, including the
erosion of the Community's maritime skills base and the problems
of providing adequate protective social provisions for foreign
seafarers. At a time of marked international concern about the
variations in training standards around the world, NUMAST is concerned
that the existing procedures for issuing CECs are inadequate and
fail to provide a sufficient check on competence, language and
cultural differences. NUMAST is also concerned that the government
has failed to provide sufficient social safeguards to protect
the increased employment of foreign officers from allegations
of exploitation. For example, the government has adopted the position
that it does not regard pay as a factor in determining whether
"decent living and working conditions" exist for seafarers
on UK ships. NUMAST has repeatedly expressed its concern that
there have been breaches of national and international law in
respect of social conditions onboard UK ships and we believe there
are inadequate provisions and resources for policing and enforcing
these issues. These cases have included illegal clauses in crew
agreements, in which non-domiciled seafarers on UK ships had contracts
making contact with a trade union or the flag state authority
a dismissible offence. NUMAST has also raised concern about the
lack of clear definition on the circumstances in which the Minimum
Wage provisions apply and about the UK's ability to ensure that
seafarers' rights are respected when they are recruited and employed
through foreign crewing agencies.
In these circumstances, NUMAST believes there is an urgent
need to reassess the original measures and to propose methods
more certainly geared to securing a long-term future for the UK's
shipping industry and the wider maritime infrastructure. Only
with such programmes in place will it be possible for the UK to
continue to sustain its leading role in the rapidly emerging new
global order of world shipping.
THE CASE
FOR FURTHER
ACTION
Charting a New Course was produced by the Shipping
Working Group (SWG) in 1998. Established by the Deputy Prime Minister
in 1997, the Group's terms of reference were to identify actions
with the aim of:
— Enabling economic and environmental benefits from
shipping.
— Reversing the UK merchant fleet's decline.
— Increasing the employment and training of British
seafarers.
— Encouraging shipowners and the maritime industry
generally to increase investment in seafarer training.
These terms of reference were decided upon because the Government
had concluded ". . . that acquiescence in the continued erosion
of the UK's core maritime capability is not a tenable policy .
. . The British economy needs environmentally sustainable transport
and a continuing maritime skills base to sustain its internationally
competitive and high-potential businesses in the shipping and
maritime-related sectors . . . [Maritime] skills are acquired
best—and most cost-effectively—through merchant navy
training and experience. This requires the sustained recruitment
and employment of British seafarers, which in turn depends heavily
on the continued participation and viability of British companies
in international shipping." (p15).
In concluding its review of the condition of the British
shipping industry, then current EU shipping policies and measures
taken in other EU member-states, the SWG asserted the need for
a comprehensive strategy incorporating an integrated set of policy
proposals (including fiscal changes) to be achieved through a
partnership of the interests involved, ie shipowners, maritime-related
industries, maritime trade unions and government, to ensure full
implementation of the necessary policy package. This "necessary
political package" both in its action points and in the preceding
text spoke repeatedly of the fundamental importance of maintaining
those maritime skills acquired through high quality training supplemented
by seagoing experience in responsible positions.
From the outset, the Deputy Prime Minister made clear the
Government's intention that the introduction of the tonnage tax
was expected to produce a great deal more than a mere increase
in the numbers of ships attracted to the British registry. Speaking
on 10 December 1999 at the ceremony marking the re-adoption of
the British-flag by the Cunard cruise liner, Caronia, the DPM
said that: "An important feature of the tonnage tax, unique
to the UK, is its establishment of a training commitment by the
industry". This was reaffirmed by the DPM speaking on 12
July 2000, when he repeated that: "A unique feature of the
tax is its linkage to a training commitment by the industry designed
to improve the nation's seafaring skills". In a speech just
two weeks later (28 July 2000), on the occasion of the launch
of the DETR's website, Our Ships Your Future , the DPM said: "This
was the right time for young people to consider a career in the
Merchant Navy. The number of ships being flagged to the UK is
increasing all the time. The British Merchant Navy is vital for
this country. It is an industry of the future and offers great
career . . . opportunities".
The DPM's emphasis on career opportunities and the "unique
feature" of the training-employment link do, of course, sit
together and are of a piece with the Government's general approach
of tying training and employment considerations into its industrial
policies—as well as underlining the distinctive feature
of the British tonnage tax regime.
These objectives were also reinforced by the Alexander Report,
published following Lord Alexander's independent inquiry into
a tonnage tax scheme. In recommending the adoption of the tonnage
tax scheme, the report emphasised that: "The DETR, the industry
and the trades unions are willing in partnership to attempt to
revive the industry and promote skilled employment to benefit
seafarers and those who switch from active seafaring to join the
valuable shore-based industries".
The use of the term "unique feature" and the creation
of the website, Our Ships Your Future, aimed at recruiting young
people, demonstrates how the Government expected that there would
be employment benefits for UK-domiciled seafarers from the tonnage
tax. It is clear from all the policy documents and associated
ministerial statements that the Government designed its approach
as a coherent whole, with clear objectives to end both the decline
of the British shipping industry and to reverse the haemorrhaging
of the country's maritime skills base.
The potentially problematic combination of a continuing inadequate
and low level of recruitment and training with the high age profile
of the existing officer workforce presents devastating consequences
for Britain's future as a maritime nation—consequences that
should be unthinkable for a country that remains so reliant upon
shipping for its economic and strategic well-being.
The scale of Britain's maritime sector and its continued
national importance cannot be over-emphasised. The UK continues
to benefit from the largest maritime sector in Europe, with a
turnover of £37 billion—twice the size of aerospace
or agriculture—and employing more than a quarter of a million
people.
Traditionally, a very significant proportion of the employment
in the maritime sector and related service industries have been
filled by former seafarers. The most recent report from the University
of Wales on the supply of experienced ex-officers for these positions
predicts how the growing shortfall in the supply of such personnel
could threaten the UK's long-term dominance of the global maritime
services market and may also help to further accelerate the loss
of British junior officers.
Updating earlier research carried out in 1996 and published
in March 2004, the report assesses current and forecast UK shore-based
demand for skilled seafarers to fill posts in such key areas as
classification societies, port services, marine insurance and
law, and maritime training. The report concluded that there are
some 132,000 jobs in the shore-based maritime sector, of which
around 12% are posts that employers would prefer to fill with
former seafarers and more than 6.5% are jobs for which companies
consider seafaring experience to be essential.
Researchers discovered that since 1996 companies have cut
the proportion of positions in the "essential" category
by as much as 23%. "This suggests that in the intervening
years there has been some reassessment by employers of the jobs
as to which jobs they need to fill with ex-seafarers and this
has led to some jobs being downgraded from the essential to the
advantage category," the report explains. It warns that this
could lead to deterioration in the quality and competence of staff
working in maritime-related posts ashore. "It is clear, in
some circumstances, that a suitably qualified and trained non-seafarer
would be an inappropriate substitute for a trained seafarer,"
the report adds. And it also warns that re-classifying jobs in
this way will not be sufficient to offset the increasing shortfall
of skilled seafarers caused by inadequate training over the past
20 years.
If present trends continue, the researchers suggest that
"UK officers currently employed at sea will be encouraged
to move to onshore employment sooner in their career than they
otherwise would have done. Without government intervention, the
report says, market forces will drive up shore-based salaries
to attract serving seafarers—creating increased wastage
from shipping companies. "If a shorter career at sea is expected
to become the norm, companies currently employing UK junior officers
will have less incentive to train them and less incentive to recruit
UK officer cadets and be more likely to employ foreign officers,"
the study argues. "Ultimately, they may even cease to employ
UK junior officers after completing their cadetship because of
the probable loss of whole age cohorts of experienced ships' officers."
The report says these developments will have serious consequences
for training programmes and could result in "footloose"
firms switching their business to offshore centres where they
can employ foreign seafarers locally. As this report has argued,
shipping is the most "globalised" of all industries
and the intense competition that characterises its operations
at every level means the process of "offshoring" is
well established. Britain's lead in many key maritime service
sectors has arisen from a combination of historic fleet size,
maritime expertise, and qualitative advantages such as high levels
of safety and efficiency. However, continued long-term failure
to ensure an adequate supply of maritime expertise will almost
certainly result in additional pressure for shore-based shipping-related
businesses and services to relocate and this will have a significant
impact on crucial sectors in which the UK presently has an international
lead, such as classification, shipbroking, marine law, protection
and indemnity, maritime training and education, and ship and crew
management. This will, in turn, have a major impact on the UK
economy. Maritime services generate more than £1,090 million
a year in overseas earnings (Maritime Services report, City Business
Series 2003), but the UK's lead is under considerable threat as
a result of the development of new maritime centres in the Asia-Pacific
region in particular.
Similarly, the potential scarcity of skilled seafarers also
presents alarming consequences for the UK's maritime safety infrastructure.
Maritime experience is essential in many safety-critical posts,
such as marine pilots, vessel traffic services, ship inspection
and surveying, salvage, coastguards, casualty investigation and
harbour masters. Unless current trends are reversed, there could
be serious problems in finding candidates for many of these posts—especially
if market forces drive up wage rates as the shortage intensifies.
This scenario is all the more disturbing given the UK's increasing
reliance upon foreign and flag of convenience shipping, which
places even greater significance upon the need for high quality
marine safety provision.
As the Cardiff University Study into the UK's requirements
for people with experience of working at sea pointed out, the
available evidence suggests that "Merchant Navy service is
still the most cost-effective training ground for many of the
short-based jobs" and NUMAST believes the government should
consider its case for an employment link in this wider context
of national needs.
It is also important to consider the wider context of international
supply and demand for seafarers. A series of studies produced
by BIMCO/International Shipping Federation and the University
of Warwick since the early 1990s have repeatedly warned of the
increasing international deficit of skilled and experienced officers.
Shortages were somewhat mitigated in the mid-1990s as a result
of the unforeseen availability of a new source of low-cost labour
from eastern Europe. However, as the most recent interim BIMCO
update admitted, the shortfall of officers has remained and last
year was estimated at 16,000, or 4% of the total workforce. The
shortages are also underlined by the ISF's 2003 interim manpower
survey, which showed 83% of its members reporting serious or moderate
shortages in the current officer supply/demand situation.
On a global basis it is clear that the international shipping
industry is falling far short of the agreed target of one cadet
per ship in the world fleet—for much of the 1990s it failed
even to meet 25% of this target—and again the most recent
BIMCO update found evidence that there had been some falling off
in recruitment in the late 1990s. The ISF interim manpower survey
last year reported than 26% of its members reported a decrease
in cadet recruitment levels since 200, 37% said there had been
no change and 37% said the figures had increased. The ISF has
also highlighted how techniques such as curtailed training, reduced
back-up and shorter leave periods have been used to mitigate the
existing shortage of officers.
However, the OECD and UNCTAD have both pointed to the ongoing
sustained increases in the volumes of world seaborne trade, which
are presently helping to fuel record levels of investment in new
tonnage. The high number of ship orders also reflects the significant
earnings to be made in many sectors of the industry—with
the Clarksea index, which measures earnings in all the main sectors
such as tankers, bulk carriers, containerships and LPG vessels,
hit US$24,970 per day in December 2003, against a trough of less
than $10,000 in 2001. Rates in many sectors have been at record
levels over the past year, and laid-up tanker and dry cargo tonnage
dropped to the lowest level for more than 30 years.
It is therefore clear that demand for seafarers will continue
to increase and greater pressure for safer and more environmentally
sensitive operations will place a greater premium of high quality
officers. The growing awareness of the importance of the human
element in safe shipping (with 80% of accidents related to human
factors) is likely to act as a brake on the trend towards ever-cheaper
seafarer labour supply sources—particularly when coupled
with new regulatory pressures, such as the ISM and ISPS Codes
and the STCW 95 requirements. New, technologically sophisticated
tonnage also requires highly skilled officers with a broad range
of technical expertise. Demand for seafarers is also likely to
increase as a result of the moves at the IMO to overhaul the principles
for the assessment of safe manning levels and by the more effective
enforcement of regulations on seafarer work hours and rest periods.
That demand, as an OECD report on the availability and training
of seafarers stated last year, is likely to continue at a broadly
consistent level for the next 10 years and to focus particularly
strongly for officers from OECD member states to fill senior ranks.
The report estimated that there should be one cadet for every
seven officers or 1.5 trainees per ship to meet these needs—while
BIMCO estimates the current ratio is around one trainee for every
10 officers. Similarly, the last BIMCO update suggested that on
current global recruitment trends the shortage of officers is
likely to grow to 46,000, or around 12% of the total workforce,
by 2010.
The shipping industry is the leading example of a global
industry. This is most visible in the seaborne volumes of globally-traded
goods and commodities—some 95% of manufactured goods, raw
materials and processed commodities are carried in ships. The
reality of the industry's uniquely advanced global character lies
in its network of interactive statutory and voluntary regulatory
agencies and organisations and in its labour market structures
and institutions which similarly span the world and make possible
those multinational crews which are unique to the shipping industry.
Within this global network of regulatory agencies and labour market
organisations, UK and UK-trained Commonwealth citizens with seafaring
experience are prominent in executive and operational roles.
The global nature of the industry—as distinct from
its centuries-old function as the carrier of international trade—is
a relatively recent development. Only in the last 40 years has
the industry grown beyond its various national origins. Until
the 1970s the shipping industry was nationally based and all nations
with sizeable fleets had their own clusters of interacting sets
of organisations representative of all interested parties. While
these clusters still exist, their role has in most cases diminished
in both width and depth. In this new global era there are now
just three principal shipping metropoles—the UK, Singapore
and Hong Kong. Of these, the UK is the most important, with its
extensive specialised linkages drawing together organisations
in banking, insurance, shipbroking, maritime law, regulation,
classification, technical consultancy, shipowning and managing,
industrial relations and seafarers' welfare. This unrivalled plurality
of institutions ensures for UK-based organisations a pivotal role
in the shipping industry's global "political system".
Two recent instances of key global developments illustrate the
central part played by UK-based organisations, with British and
British-trained former seafarers having a pivotal role in developing
the revised International Maritime Organisation convention on
Standards of seafarer Training, Certification and Watchkeeping
(universally accepted as a necessary measure to ensure acceptable
standards of competence in the emergent global labour market)
and in last year's agreement on the formulation of international
collective bargaining machinery aimed at stabilising the global
labour market.
Also important, given the highly integrated nature of world
shipping operation and regulation, are the roles played in centres
such as the Arabian Gulf, Hong Kong and Singapore by UK ex-seafarers
and others either trained and educated in British maritime academies
and universities, or in institutions modelled on the British system
and paralleling its curricula.
The British-owned and controlled shipping enterprises are
no longer dominant in world shipping and it would, of course,
be far too much to claim that the rest of the world still follows
the British model of maritime law and tripartite administration
as it did 100 years ago. On the other hand, that historical background
is fundamental to the continuing significant contribution made
by British personnel and British practices and approaches to devising
and then administering realistic policies in global shipping.
This contribution could not continue without people with a foundation
in the practice of professional seafaring and in a political culture
where the value of negotiated consent is a core value.
CONCLUSIONS
The issues to be addressed are obvious enough: Britain, if
it is to remain a major global maritime influence, is in desperate
need of measures that will ensure an enhanced flow of skilled
and experienced maritime personnel.
Since 2000, the government's maritime policies have had a
welcome impact in reversing the serious long-term decline of the
British merchant fleet. However, the policies have not resulted
in a matching increase in the recruitment, training and employment
of British Merchant Navy officers.
NUMAST believes the government must now act urgently to implement
measures that will "finish the job" begun by the introduction
of the tonnage tax scheme and to fulfil the critical policy objectives
of increased UK officer employment and training.
The creation of the training link to tonnage tax has had
a welcome, though limited, impact on cadet numbers. It is clear
that significantly more must be done to provide a more assured
pathway for training and promotion to the senior positions in
which UK nationals are in demand—not just domestically,
but throughout the world. Indeed, for the past 20 years around
50% of NUMAST members have served under foreign flags and with
foreign employers—although largely in the senior ranks.
NUMAST recognises that, in an international market place,
the cost differentials between UK officers and those from developing
nations often over-ride the natural preference for British owners
to recruit and train British junior officers. The government must
facilitate the provision of employment opportunities for cadets
recruited through the tonnage tax scheme by building on the tonnage
tax requirement with a further commitment to an employment link
for junior officers that will ensure they can progress to at least
a minimum of Chief Mate and second Engineer certification.
NUMAST also recognises that some shipowners may seek to argue
that the pay differentials between British and foreign officers
will mean that any such requirement will "frighten off"
companies from the tonnage tax scheme. However, there are already
examples of "best practice" operators—such as
Maersk, CP Ships, Hatsu Marine and P&O Nedlloyd—who
are making a commitment to defined long-term training and employment
pathways for British officers. In addition, with the implementation
of outstanding recommendations for stimulating British seafarer
employment—such as improvements in SMarT training assistance,
increases in the scope of the crew relief costs scheme, and the
introduction of an employment grant in the shortsea sector—will
help to narrow the employment cost differentials. NUMAST recognises
that there are good, reputable companies who are committed to
the training and employment of UK officers. Their interests are
not served—indeed they are undermined—by the current
situation and the focus of this submission is for a training obligation
aimed at those tonnage tax companies that do not employ any UK
officers at all. The government, in its Charting a new course
document noted that "there is clear evidence of market failure
in seafarer training" and that "there is a far greater
"free-rider" effect than in [other] industries".
Again, the employment link would help to address such issues.
The inherent "value added" element of such measures
can also be enhanced by further measures to ensure that young
people of the right quality are recruited as trainee officers
and put through a rigorous programme offering clear and attractive
routes of advancement. NUMAST believes that offering such defined
pathways will help to significantly reduce cadet attrition rates.
These proposed measures will only be successful if new entrants
have genuine career prospects. The industry generally and not
just in the UK has become accustomed to crewing from a global
labour market and taking the lazy view that "the market will
provide". This has not always been the view in the UK industry—least
of all in the liner and tanker trades. But, apart from a small
number of companies, it is hard to find anyone with strategic
plans for human resources. It is easier to go "shopping"
for the latest fashion in officer supply, thus obviating the need
to engage in the organisational disciplines and investment of
the long view.
In these circumstances it seems unavoidable that there must
be some mechanisms put in place to ensure that the required employment
linkage attached to tonnage tax membership is capable of delivering
a sustainable stream of professional seafarers. Regulation can
accomplish this by the simple application of a rule requiring
recruitment within flexible parameters and a subsequent period
of employment as a junior officer. Incentives can be built in
by integrating training and education within the mainstream state
sector (which is normal practice in most other EU states). A number
of employers have already committed themselves to partnership
agreements with NUMAST where they undertake to train UK cadets
and offer them employment subsequent to training. DfT policy with
regard to the tonnage tax should therefore give shipowners the
option of having formal agreements with relevant trade unions
or being obliged to enter into contractual commitments with the
DfT where they agree to both train and offer post-training employment
as junior officers.
In order to address the imminent crisis of persons sufficiently
experienced in senior positions and needed for employment in the
industry's infrastructure prompt action could ensure that within
a five/six year period the UK would be in a position to replenish
its stock of senior officers. This could be accomplished by identifying
potential high-flyers coming through existing cadet programmes
and then providing a phased programme of additional training in
short courses to prepare them for early command and chief engineer
positions. There is a very long but largely overlooked history
of persons in their mid/late 20s being appointed master and chief
engineer and proving to be extremely successful both aboard ship
and subsequently ashore in highly responsible shipping industry
positions. Considerable work has already been undertaken through
the Merchant Navy Training Board towards creating a modern, flexible
and productive stream of training avenues for officers and the
concepts outlined above will help to ensure that the introduction
of an employment link for junior officers will form part of a
coherent package to deliver the well-trained, competent and efficient
senior officers that remain in consistent demand at home and throughout
the world.
RECOMMENDATIONS
1. The government must build on the limited success of
the training link to tonnage tax by introducing an employment
link.
2. The employment link needs to be simple and flexible,
but capable of ensuring that qualifying cadets are able to gain
subsequent periods of employment and training as junior officer,
progressing to Chief Mate and second Engineer certification as
a minimum.
3. To increase "value added" and to help to
narrow employment cost differentials, the government must implement
outstanding recommendations for stimulating British seafarer employment,
including:
— improvements in SMarT training assistance, up
to 100% of eligible costs up to first certificate level;
— increases in the scope of the crew relief costs
scheme;
— the introduction of an employment grant in the
shortsea sector and simplification of the seafarers' Foreign Earnings
Deduction scheme; and
— widening the tonnage tax provisions to include
aggregate dredgers (approved, but still not implemented) and specialist
offshore vessels—both areas of considerable employment and
training for UK officers.
4. The government must also develop a more coherent policy
towards the regulation of the social conditions of foreign seafarers
on British ships, either through the development of effective
collective bargaining agreements involving the social partners
or through more rigorous controls over the issue of Certificates
of Equivalent Competency, the issue of one-port work permits and
the enforcement of minimum wage requirements
June 2004
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