Select Committee on Transport Written Evidence


Memorandum by Dr David Glen (TT 04)

TONNAGE TAX

THE QUESTIONS

  The questions posed for the hearing of 23 June address the following:

    —  Is tonnage tax succeeding in increasing the number of vessels on the UK register?

    —  Is tonnage tax increasing the number of cadets?; and

    —  Once qualified are the young officers gaining maritime employment, particularly under the UK flag?

    —  Are there changes which could be made to make the regime more effective?

EVIDENCE

  The evidence submitted in this memorandum is derived from work carried out by staff at the Centre for International Transport Management, and published in the UK Seafarers Analysis over the years 1997-2003.

  Using the data provided in the summary table 1 below, it is clear that:

    1.  Cadet numbers have improved significantly since the Tonnage Tax was introduced in 2000. Table 1 clearly shows an increase in numbers of new trainees (the annual intake) in 2002 and 2003.

    2.  Officer numbers are more difficult to comment on. As Table 1 indicates, numbers have oscillated, but this appears to be primarily due to the widening coverage of certificated officers post implementation of STCW'95, which has offset the effects of an ageing officer population.

EVIDENCE ON CADET NUMBERS

  The annual publication of the UK Seafarers Analysis has monitored the numbers of new cadets entering training programmes over the past seven years. There have been significant changes in the way such training is supported. At present the government supports most UK cadet trainees through the SMaRT scheme, which provides a grant towards the cost of training. The other incentive to train for certain companies, is the existence of the Tonnage requirement that all companies electing for the Tonnage tax regime should be training one cadet officer for every 15 officer employees.

Table 1

SUMMARY OF UK SEAFARER NUMBERS, 1997-2003
    Cadets Officers
Ratings
Total Active
Calendar YearTotal in Training Annual Intake    Actual Totals Seafarers
19971,130450 17,62010,86029,610
19981,158544 17,35610,79529,309
19991,127425 15,89711,40928,085
20001,031480 16,46410,33127,826
20011,086468 14,3959,70725,188
20021,175631 15,12510,36026,660
20031,045603 17,12610,03728,208
Average514
% Change
(1997 =100)
-7.52 -2.80-7.58 -4.73

Source: Derived from UK Seafarers Analysis, 1997-2003

  It is clear from the above Table that there has indeed been quite a significant increase in the numbers of new trainee cadets. The figures for 2003 in the above Table are probably an underestimate, given the time that the data was prepared. An estimate of 620-630 would not be unreasonable.

CAN ALL OF THE INCREASE BE PUT DOWN TO THE TONNAGE TAX CHANGE?

  This is a difficult question to answer. There has been a much greater proportional increase in the numbers of UK registered vessels, reflecting company shifts to take advantage of the tonnage tax provisions, but it does not follow that we should expect a directly proportional response. This is because many companies may have already satisfied the training requirements prior to their election of the tonnage tax, and this would imply that no significant change in cadet recruitment need be observed. In my opinion, the shift is probably primarily related to the new regime, and in that sense the tonnage tax can be regarded as improving the viability of future UK officer numbers.

IS THE INCREASE ENOUGH TO ALTER LONG TERM PROSPECTS FOR OFFICER NUMBERS?

  Probably not. The latest projections made in UK Seafarers Analysis 2003 is presented in Annex 1 below. The critical element to notice is the assumed cadet entry rate of 600 per year, plus wastage rates of 8% per year during training, and 6% per year during the ages of 20-30 as officers. Table 2 reveals an expected decline in officer numbers (assuming a retirement age of 65) from 17,126 (the number of officers for which full information was available in the databases) to 15,031 in 2008, a decline of some 12.2% over the period. There is a more dramatic decline projected in the officer stock when the retirement age is taken to be 57; from 14,311 in 2003 to 10,690 in 2008, a decline of the order of 25% in the same period. These short-term declines will occur irrespective of changes in government policy, although they are still subject to errors in the assumptions about cadet entry and wastage rates, which may have an impact. Taking the projections to 2018 simply extends the decline on both retirement age assumptions. Officer numbers are expected to fall further to 9,817 from the 2008 figure of 15,031 a 34.6% reduction over the ten year interval. The "57" officer stock declines from 10,690 in 2008 to 6,650 a 37.8% reduction in total.

Table 2

PROJECTIONS OF UK OFFICER NUMBERS 2003-18 (Most Likely Scenario)
Age 65Year 200320042005 20062007 200820092010 20112012 201320142015 20162017 2018
TotalNumbers17,126 16,70616,29515,887 15,48715,03114,530 14,04013,49312,848 12,27911,77511,286 10,81510,3179,817
Deck0.569,591 9,3559,1258,897 8,6738,4178,137 7,8627,5567,195 6,8766,5946,320 6,0565,7785,498
Engineer0.447,535 7,3517,1706,990 6,8146,6146,393 6,1785,9375,653 5,4035,1814,966 4,7594,5404,319
Age 57Year 200320042005 20062007 200820092010 20112012 201320142015 20162017 2018
TotalNumbers14,312 13,40312,61711,931 11,28810,69010,084 9,4948,9638,435 8,0097,6147,289 7,0226,8196,650
Deck0.568,015 7,5067,0666,681 6,3215,9865,647 5,3175,0194,724 4,4854,2644,082 3,9323,8193,724
Engineer0.446,297 5,8975,5525,250 4,9674,7034,437 4,1783,9443,712 3,5243,3503,207 3,0903,0002,926

Wastage Rates
20 < 300.06
30 < 500.06
50 plus0.01


Cadet Entry Rates
Input600
Wastage0.08
Output430


Source: UK Seafarers Analysis 2003, Table 3.8

  

  It is clear that this projection does not give an encouraging prospect for the long term careers prospects of officers, even if cadet numbers have increased.

  It should be noted that the above projection is for all certificated officers. Throughout the period 1997-2003, an estimated figure of 9% was used to allow for the numbers of shore-based workers who hold valid STCW'95 certificates of competency. This figure has recently been challenged by a number of other research studies, who put the estimate considerably higher. It is clear that UK active officer numbers are therefore verging on the "optimistic" side if the 9% figure is an understatement.

  The increase in officer numbers seen in 2002 and 2003 might be read as reflecting a rise in employment of UK officers as UK registered ships have also increased in this period. There are no firm grounds for believing this to be the case. First, officers and ratings employed on UK registered tonnage do not have to be UK nationals. EU nationals have the same employment rights under European employment law. Second, if it were the case that a large increase in officer employment had occurred, NUMAST and other unions would no doubt have been celebrating this fact. As stated earlier, the author is of the opinion that the fluctuation in officer number observed in the past few years is more likely to be due to the widening implementation of STCW'95.

RATINGS EMPLOYMENT

  It is clear from Table 1 above that ratings numbers have not altered significantly in the past two years. There is a caveat to be read into these figures however. They are based upon the UK Chamber of Shipping Fleet and Manpower survey for 2002. The results of this survey are affected by the differential non-response of certain companies who are members of the chamber, and of course, do not include any ratings employed by companies which are not Chamber members.

CONCLUSION

  The author is of the opinion that the tonnage tax has had a significant impact upon the cadet intake in the past two years. There is also evidence that there has been an increase in the number of certificated officers in the 20<25 and 25 <30 year age groups. Their numbers rose from 799 to 908, and 1,127 to 1,203 respectively. The overall change in the numbers in this age group since 1997 was 36.5% and 10% respectively (see Table 3). Whether these young officers are employed by UK companies is not possible to ascertain from the data.

  The long term prognosis for UK active officer numbers is still not very good however.

Table 3

COMPARISON OF UK OFFICER AGE PROFILES IN 1997, 1999 and 2003

Age(years)Total 1997 Total 1999Total 2002 Total 2003% Difference 2002-03 % Difference
1997-2003
15 011 09
20 <25666708 79990813.6 36.3
25 <301,0891,231 1,1271,2036.7 10.5
30 <351,2381,007 1,1151,24111.3 0.2
35 <401,9751,727 1,2781,2820.3 -35.1
40 <452,8762,716 2,1322,2344.8 -22.3
45 <502,9052,766 2,8123,12211.0 7.5
50 <552,9772,775 2,6282,98613.6 0.3
55 <602,1081,978 2,2492,82825.7 34.2
60 <651,303978 8941,31346.9 0.8
Age 15 <6517,13715,897 15,03417,12613.9 -0.1
Age to 5714,59913,895 12,99714,31210.1 -2.0
All Ages17,13715,897 15,11417,40815.2 1.6
Under 404,9684,684 4,3194,6437.5 -6.5
Over 4012,16911,213 10,71512,48316.5 2.6
Source: Table 7.2 UK Seafarers Analysis 2003

Dr David Glen

Reader

Centre for International Transport Management

London Metropolitan University

June 2004


References

McConville J, Glen D, and Dowden J

United Kingdom Seafarers Analysis 1997

The Centre for International Transport Management

London Guildhall University, London 1998

McConville J, Glen D, and Dowden J

United Kingdom Seafarers Analysis 1998

The Centre for International Transport Management

London Guildhall University, London 1999

Glen D, McConville J, and Dowden J

United Kingdom Seafarers Analysis 1999

The Centre for International Transport Management

London Guildhall University, London 2000

Glen D, McConville J, and Dowden J

United Kingdom Seafarers Analysis 2000

The Centre for International Transport Management

London Guildhall University, London 2001

Glen D, Dowden J, and McConville J

United Kingdom Seafarers Analysis 2001

The Centre for International Transport Management

London Guildhall University, London 2002

Glen D, Dowden J, and McConville J

United Kingdom Seafarers Analysis 2002

The Centre for International Transport Management

London Guildhall University, London 2003

Glen D, Dowden J, and McConville J

United Kingdom Seafarers Analysis 2003

The Centre for International Transport Management

London Guildhall University, London 2004





 
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