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 Year | Total in Training
| Annual Intake | Actual Totals
| Seafarers
|
1997 | 1,130 | 450
| 17,620 | 10,860 | 29,610
|
1998 | 1,158 | 544
| 17,356 | 10,795 | 29,309
|
1999 | 1,127 | 425
| 15,897 | 11,409 | 28,085
|
2000 | 1,031 | 480
| 16,464 | 10,331 | 27,826
|
2001 | 1,086 | 468
| 14,395 | 9,707 | 25,188
|
2002 | 1,175 | 631
| 15,125 | 10,360 | 26,660
|
2003 | 1,045 | 603
| 17,126 | 10,037 | 28,208
|
Average | | 514
| | | |
% 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 65 | Year |
2003 | 2004 | 2005
| 2006 | 2007 |
2008 | 2009 | 2010
| 2011 | 2012 |
2013 | 2014 | 2015
| 2016 | 2017 |
2018 |
Total | Numbers | 17,126
| 16,706 | 16,295 | 15,887
| 15,487 | 15,031 | 14,530
| 14,040 | 13,493 | 12,848
| 12,279 | 11,775 | 11,286
| 10,815 | 10,317 | 9,817
|
Deck | 0.56 | 9,591
| 9,355 | 9,125 | 8,897
| 8,673 | 8,417 | 8,137
| 7,862 | 7,556 | 7,195
| 6,876 | 6,594 | 6,320
| 6,056 | 5,778 | 5,498
|
Engineer | 0.44 | 7,535
| 7,351 | 7,170 | 6,990
| 6,814 | 6,614 | 6,393
| 6,178 | 5,937 | 5,653
| 5,403 | 5,181 | 4,966
| 4,759 | 4,540 | 4,319
|
Age 57 | Year |
2003 | 2004 | 2005
| 2006 | 2007 |
2008 | 2009 | 2010
| 2011 | 2012 |
2013 | 2014 | 2015
| 2016 | 2017 |
2018 |
Total | Numbers | 14,312
| 13,403 | 12,617 | 11,931
| 11,288 | 10,690 | 10,084
| 9,494 | 8,963 | 8,435
| 8,009 | 7,614 | 7,289
| 7,022 | 6,819 | 6,650
|
Deck | 0.56 | 8,015
| 7,506 | 7,066 | 6,681
| 6,321 | 5,986 | 5,647
| 5,317 | 5,019 | 4,724
| 4,485 | 4,264 | 4,082
| 3,932 | 3,819 | 3,724
|
Engineer | 0.44 | 6,297
| 5,897 | 5,552 | 5,250
| 4,967 | 4,703 | 4,437
| 4,178 | 3,944 | 3,712
| 3,524 | 3,350 | 3,207
| 3,090 | 3,000 | 2,926
|
| | |
| | | |
| | | |
| | | |
| | |
Wastage Rates | |
20 < 30 | 0.06 |
30 < 50 | 0.06 |
50 plus | 0.01 |
Cadet Entry Rates |
|
Input | 600 |
Wastage | 0.08 |
Output | 430 |

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 1999 | Total 2002
| Total 2003 | % Difference 2002-03
| % Difference
1997-2003 |
15 | 0 | 11 |
0 | 9 | |
|
20 <25 | 666 | 708
| 799 | 908 | 13.6
| 36.3 |
25 <30 | 1,089 | 1,231
| 1,127 | 1,203 | 6.7
| 10.5 |
30 <35 | 1,238 | 1,007
| 1,115 | 1,241 | 11.3
| 0.2 |
35 <40 | 1,975 | 1,727
| 1,278 | 1,282 | 0.3
| -35.1 |
40 <45 | 2,876 | 2,716
| 2,132 | 2,234 | 4.8
| -22.3 |
45 <50 | 2,905 | 2,766
| 2,812 | 3,122 | 11.0
| 7.5 |
50 <55 | 2,977 | 2,775
| 2,628 | 2,986 | 13.6
| 0.3 |
55 <60 | 2,108 | 1,978
| 2,249 | 2,828 | 25.7
| 34.2 |
60 <65 | 1,303 | 978
| 894 | 1,313 | 46.9
| 0.8 |
Age 15 <65 | 17,137 | 15,897
| 15,034 | 17,126 | 13.9
| -0.1 |
Age to 57 | 14,599 | 13,895
| 12,997 | 14,312 | 10.1
| -2.0 |
All Ages | 17,137 | 15,897
| 15,114 | 17,408 | 15.2
| 1.6 |
Under 40 | 4,968 | 4,684
| 4,319 | 4,643 | 7.5
| -6.5 |
Over 40 | 12,169 | 11,213
| 10,715 | 12,483 | 16.5
| 2.6 |
Source: Table 7.2 UK Seafarers Analysis 2003
Dr David Glen
Reader
Centre for International Transport Management
London Metropolitan University
June 2004
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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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