Memorandum by the RMT (TT 06)
THE TONNAGE
TAX
Introduction
The National Union of Rail, Maritime and Transport
Workers (RMT) welcome the opportunity to contribute to your Inquiry
into the tonnage tax. RMT represent 70,000 workers in a number
of transport industries. We are also the specialist union for
seafaring ratings and represent the majority of UK seafaring ratings
currently in employment. Ratings comprise at least half of seafaring
personnel employed on a ship.
RMT worked alongside NUMAST and the Chamber
of Shipping to negotiate the introduction of the tonnage tax with
the Department of Transport and the Treasury. The objective of
the tonnage tax was to increase employment for UK seafaring officers
and ratings.
At the time the Chamber of Shipping resisted
a cast iron commitment for employing UK ratings as has been stipulated
for cadets. Instead more general commitments were made to increase
the training and employment of UK ratings. More detail on these
will be given in this submission. Any study on the how effective
the tonnage tax has been also needs to examine whether the concession
has increased training and employment opportunities for UK seafaring
ratings. We recognise that exact numbers cannot be measured as
against the set benchmark that exists for cadets. However the
success of the concession in delivering general increases in training
and employment for ratings can be accessed.
Whilst RMT will comment briefly on the position
for cadets I trust the committee will understand that our expertise
in this area is obviously focused on ratings. In summary we can
advise the committee that contrary to the commitments and expectations
surrounding the benefits of the tonnage tax, increased training
and employment opportunities have not materialised for UK ratings.
The tax has actually only produced small increases in the number
of cadets being trained and for ratings the results have been
even more unsatisfactory. Indeed RMT can advise that employment
opportunities for UK seafaring ratings continues to decline and
the number of trainee ratings has fallen even further from the
already low position at the time of the introduction of the tonnage
tax.
The background
In the run up to the Department of Transport
policy document, "Charting a New Course", the
industry showed real unity of purpose in persuading Government
to introduce a series of measures that we hoped would address
the long term decline of the industry in the UK.
The union entered into an alliance with other
industry partners in good faith. There were a wide range of proposals
to boost the industry within "Charting a New Course".
Employer representatives clearly stated that a lot of the good
work in developing and implementing the proposals would not necessarily
produce employment benefits without a more favourable tax regime.
From the start it has always been quite clear
that the purpose of the tonnage tax was to increase both the number
of ships on the UK Register and also generate training and employment
for UK seafarers, both officers and ratings.
At the end of 1997 the Deputy Prime Minister
established a special shipping working group whose terms of reference
were to identify actions:
— To enable the maximum economic and
environmental benefit to be obtained from shipping.
— To reverse the decline in the UK
Merchant Fleet.
— To increase the employment and training
of British seafarers.
— To encourage shipowners and the wider
maritime industry to commit more resources to seafarer training.
In addition the White Paper on the Future of
Transport was published in July 1998. This set out four aims of
an integrated shipping policy:
— To facilitate shipping as an efficient
and environmentally friendly means of carrying our trade.
— To foster the growth of an efficient
UK-owned merchant fleet.
— To promote the employment and training
of British seafarers in order to keep open a wide range of job
opportunities for young people and to maintain a supply of skills
and experience vital to the economy.
— To encourage UK ship registration,
to increase ship owners identification with the UK, to improve
our regulatory control of shipping using UK ports and waters and
to maintain the availability of assets and personnel that may
be needed in time of war.
The Government developed its strategy for UK
shipping as set out in "Charting a New Course"
on the basis of the aims of the White Paper on Transport and the
work of the Shipping Working Group. As we have illustrated the
need to increase training and employment opportunities for UK
seafaring officers and ratings was of course at the forefront
of all discussions and policy statements.
We shall give details on the position for UK
seafaring ratings later in the paper. First of all we will make
brief comments on the other questions as set out by the Transport
Committee.
Increases in the number of vessels on the UK Register
There is no doubt that the introduction of the
tonnage tax has succeeded in increasing the number of vessels
on the UK Register. As at 31 December 2003 there were a total
of 483 merchant trading vessels over 500 gross tons. In December
1997 the equivalent number of trading vessels of this tonnage
was 246.
Much of the increase has arisen as a result
of the tonnage tax, although many ships claiming tonnage tax are
not on the UK Register. The ships entering the UK Register are
increasingly being crewed by low cost foreign nationals. In fact
RMT are not currently aware of any tonnage tax trainee ratings
positions or increases in ratings employment, only ratings to
officer schemes. NUMAST will no doubt also reiterate that ships
switching to the UK Register are often crewed almost entirely
with low cost foreign national seafaring officers and ratings.
Despite the very significant increase in tonnage
on the UK register only 53% of vessels currently claiming tonnage
tax concessions are registered in the UK. This is because there
is no actual requirement for ships to be on the UK Flag. RMT believe
it is desirable for ships claiming tonnage tax concessions to
be registered in the UK. However the most important factor is
that the concession should regenerate UK maritime skills. As we
have stated above UK registration has not led to increased training
and employment opportunities for UK seafaring ratings and this
is why a formal training and employment link is required.
Whilst the flag of the vessel is not always
of paramount importance RMT are concerned about a number of the
Flag States currently enjoying tonnage tax concessions. Recent
figures at the Shipping Task Force (May 2004) illustrate that
many states with registers classified as Flags of Convenience
are claiming tonnage tax concessions. Following the UK Register
Liberia has a total of 64 ships entered into the tonnage tax regime.
Also in the top 10 are FOC states Bermuda, the Bahamas, Panama,
Malta and St Vincent. Flags of Convenience (FOC) are those states
that have been deemed by the International Transport Workers Federation
(ITF) to have little effective control over vessels on their register.
The vessels are not beneficially owned and controlled in the Flag
State and little attention is paid to upholding international
regulations that govern international standards on safety and
maritime law.
The ITF have a network of inspectors investigating
suspect ships and their reports have found that seafarers suffer
very low wages, poor on board conditions, inadequate food and
clean drinking water, and long periods of work without proper
rest leading to stress and fatigue. The home countries of the
crew can do little to protect them as the rules that apply are
those of the country of registration and these states do not usually
enforce minimum standards.
The union have questioned the commitment of
many shipping companies in the tonnage tax to the broader objectives
of UK shipping policy, foremost of which is the strengthening
of UK maritime skills. The figures from the shipping task force
revealing a majority of FOC registers at the heart of the tonnage
tax regime only serves to confirm our belief that resources from
the taxpayer are not being spent wisely.
Increases in cadets and employment for officers
Latest figures on the number of cadets were
provided at the May 2004 meeting of the Department of Transport
Shipping Task Force Working Group. They revealed that in 2003-04
there were a total of 657 cadets on the Government sponsored SMART
training programme.
This is a little less than half that required
to replenish current numbers of serving seafaring officers and
also to provide sufficient personnel likely to transfer from sea
to shore service. On shore ex-seafarers are deemed as essential
or very desirable to work in a number of positions. These include
those associated with port and harbour services, pilotage, classification,
maritime training, insurance and law.
In addition to the insufficient number of cadets
being trained there remains a further problem for UK seafaring
officers. The tonnage tax requires that there be a training place
for one cadet from every 15 officers on board vessels qualifying
for the tonnage tax concession. Unfortunately it appears from
reports in the Shipping Task Force Working Group that many companies
are discharging just their minimum responsibilities under the
tonnage tax regime. This means that when cadets have completed
training there is in many instances no position for them within
the company. In particular whilst senior officers can find employment
there are particular problems for junior officers as shipping
companies are increasingly employing low cost foreign nationals
who now make up 75% of these positions.
Seafaring ratings and the tonnage tax
At the current time shipping companies opting
for the tonnage tax regime are supposed to review annually the
feasibility of adopting each of the ratings employment and development
options. The four routes below were identified by the Ratings
Task Force Working Group, a tripartite body involving the Chamber
of shipping, NUMAST and RMT. The four options were subsequently
written in to the Minimum Training Commitment of the tonnage tax
as overseen by the Department of Transport.
The four routes identified for developing ratings
skills and employment were as follows:
— Employ more UK ratings.
— Employ more highly trained UK ratings
in more technical posts.
— Recruit UK ratings in a planned stream
towards officer qualifications.
— Assist existing UK ratings to advance
towards officer qualifications and posts.
The above routes towards ratings employment
are largely ignored by the shipping companies entering the tonnage
tax regime. Indeed, aside from the ratings to officer schemes,
it appears that there is a complete lack of information on ratings
employment arising from the tonnage tax, so much so that it is
never reported in the Shipping Task Force.
It is apparent that the numbers of new ratings
trainees has actually declined since the measures were introduced.
Although there are now far more ships on the UK register, the
shipowners have taken advantage of the low social standards that
now permeate vessels under the UK Flag. So much so that the outgoing
IMO Secretary General has had cause to specifically record his
concern over the low standards of employment on the UK Flag. In
addition as a result of these factors RMT, together with NUMAST,
have now tabled a motion at the ITF to declare certain UK ships
an FOC (Flag of Convenience) on a ship by ship basis.
The Independent Enquiry into the tonnage tax,
conducted by Lord Alexander in 1999, correctly records that RMT
called for a written commitment to train seafaring ratings. The
Chamber of Shipping would not accept this despite our representations.
It is certainly now arguable that we should have attempted to
take a tougher line in negotiations as five years have since passed
and the objective of increased employment for UK seafaring ratings
has not been fulfilled. However, at a time when there really was
a sense of partnership in the industry, it would have been difficult
to try and place a veto on the tonnage tax when we hoped that
it would at least have had some positive consequences for ratings
employment, even without the formal link.
The Chamber of Shipping stated that they preferred
a non-formal commitment to double the current intake within three
years. They also stated that a new structure and programme for
ratings training could be developed. Separately the Chamber of
Shipping made a commitment on behalf of its members to make every
effort to increase the recruitment and training of British officers
and ratings by 25% each year on a cumulative basis. This should
have had the effect of by now doubling the numbers of new ratings
entrants.
The one very limited success that has been achieved
for ratings are the opportunities that have been generated for
those who wish to train to reach officer status. However, whilst
this is welcome, the real test is the overall numbers of ratings
positions and the total amount of training taking place to replenish
the existing ratings complement.
Latest figures on ratings trainees disclosed
at the Shipping Task Force would seem to indicate that approximately
50 new ratings trainees are being trained every year. This is
less than the number of ratings who were being trained at the
time of the discussions on the tonnage tax. Figures supplied to
us by the Chamber of Shipping, at the time of deliberations within
the Ratings Task Force sub-group in 1998, indicated that approximately
200 new ratings were being trained every year.
We should point out that 200 new trainees are
barely sufficient for maintaining the skills base for even the
current low number of UK seafaring ratings. The fact that numbers
have deteriorated to around a quarter of this figure graphically
illustrates just how desperate the situation is for UK seafaring
ratings.
In addition we also have to advise that new
structures and programmes for ratings training, with the exception
of ratings to officer courses, have not been forthcoming. The
union is not tied to old methods of working, and we would have
given constructive consideration to any proposals that would protect
and enhance UK ratings employment.
The tonnage tax is the centrepiece of Government
shipping policy and RMT believe that the resources devoted to
the tonnage tax demand that taxpayers gain value for money in
the form of some tangible benefits. A much improved employment
environment for all UK seafarers is, we would strongly argue,
the most significant in this equation.
The employment environment
RMT have consistently conveyed the gravity of
the situation for UK seafaring ratings to the Department of Transport.
Since the introduction of the tonnage tax job losses have continued.
The union produced a special report outlining the declining prospects
for UK seafaring ratings (RMT Submission to the Shipping Task
Force on Ratings Employment Conditions and Job Opportunities—October
2000) just after the start of the tonnage tax. The document reported
that UK seafaring ratings had been dismissed and replaced by low
cost foreign nationals by P&O Irish Sea Ferries, Bibby International
and Serac Maritime Crewing.
Since this time employment for UK seafaring
ratings has continued to fall. Hundreds of redundancies have recently
been announced at P&O Dover and this was quickly followed
by 150 dismissals of UK ratings by Northern Marine Manning Ltd.
The UK seafarers engaged by Northern Marine to work on the Technip
diving and pipelay fleet have been replaced by low cost Filipino
nationals. This follows similar moves by many other operators
in the offshore sector of the industry. UK seafaring ratings have
also been replaced by low cost foreign nationals in the hotel
and catering department on P&O European Ferries (Portsmouth)
vessels.
Chamber of Shipping representatives have previously
stated that it is unrealistic to expect UK seafaring ratings to
be employed on deep sea (foreign going) ships and that RMT should
focus on the short sea ferry routes. However in the last few years
employment for UK seafaring ratings has been steadily eroded even
on the ferries operating from UK ports. P&O have dismissed
many UK seafaring ratings from their operations in the North and
Irish Sea. Even Stena Line has now started to engage low cost
foreign nationals on UK ferry routes.
In 1980 there were a total of 30,000 UK seafaring
ratings in employment. This figure has now dropped to less than
10,000. Due to the complete failure of the industry to train UK
seafaring ratings since the introduction of the tonnage tax this
figure will fall dramatically in forthcoming years, especially
in the more skilled deck and engine grades.
The once thriving maritime ports continue to
suffer the effects of the loss of employment, and the demise of
UK maritime expertise poses a serious threat to the future health
of many maritime industries and services that provide significant
economic and employment opportunities. In addition the continued
replacement of UK seafarers also poses a growing threat to the
safe operation of shipping in our waters, especially where it
is evident that requirements for a common language amongst core
crew with safety responsibilities in emergency situations are
not being properly enforced.
Charting a New Course did incorporate a number
of other employment and training measures separate from the tonnage
tax. RMT have sought the full implementation of the work permit
regime and the whole repeal of section nine of the Race Relations
Act 1976.
In the recent consultation on the implementation
of the EU Equality Directives the Government decided to retain
section nine of the 1976 Act. This section specifically allows
shipowners to discriminate with lower rates of pay on the grounds
of nationality providing seafarers who are employed on UK ships
are engaged and resident abroad. Originally this outdated discrimination
allowed for lower rates of pay on the basis of colour, ethnic
origin, race or nationality. The Government have sought to convey
a compromise by removing colour, race and ethnic origin from section
nine. However by leaving shipowners the ability to discriminate
on the grounds of nationality has meant that the status quo has
been maintained. Employers have been permitted to continue the
dismissals of UK seafarers, and UK ratings and officers have been
replaced by foreign nationals on low rates of pay.
The Home Office had originally proposed that
section nine be entirely removed form the statute book. However
it is very regrettable that the Department of Transport intervened
following representations from the Chamber of Shipping and produced
a Government u-turn on this matter.
We are of course aware that shipping is a globalised
industry but certain minimum employment and equal rights legislation
must still be enforced. In any other transport industry the current
practices of shipowners would be illegal, and the dismissals of
UK seafaring ratings are even more inexcusable when we consider
the benefits that the industry has received through the tonnage
tax.
The tonnage tax involves considerable Government
resources. In answer to a Parliamentary Question by Kelvin Hopkins
on 5 January 2004, the Paymaster General, Dawn Primarolo, revealed
in the House of Commons that in the last financial year 2002-03,
the value of the financial concessions given to the UK shipping
industry was £35 million. The Paymaster General stated that
since the scheme started in 2000 the total value of the concessions
amounted to £70 million. RMT believe that taxpayers have
every right to expect a better return on their money given the
woefully insufficient return in respect of both training and employment
for seafaring ratings and officers.
More generally the industry has also called
for further Government action on the Crew Relief Costs Scheme
and an extension of Foreign Earnings Deductions. Whilst RMT support
these proposals, the fact that they have not been implemented
is no excuse for the industry's miserable performance on ratings
training and employment since the introduction of the tonnage
tax.
It is apparent that if the Government believe
that its room for action on the regulatory front is limited through
membership of the European Union, then the enforcement of minimum
employment and training for all UK seafarers will need to be addressed
in every other way possible.
Changes to make the regime more effective
It is true that the measures as set out in Charting
a New Course have not been introduced in their entirety; however
it is recognised that the Government have undertaken a great deal
of work in attempting to formulate and implement policies that
turn around the fortunes of the industry. Ministers have also
acknowledged that more work needs to be undertaken in improving
the employment situation for UK seafaring ratings. A clear link
between eligibility for the tonnage tax, and positions for UK
seafaring ratings, is one of the few options left to Government
if action is actually to be taken to address the situation.
Whilst UK seafaring ratings continue to be replaced
by low cost foreign nationals the Union, and we believe the taxpayer,
cannot possibly support the continuation of the tonnage tax without
a clear link to the employment of both UK seafaring ratings and
officers. We must also advise the Government that the link should
enshrine not only an employment obligation, but also a training
one as well.
The urgency of a training commitment is also
illustrated by the increasingly high age profile of UK seafaring
ratings. The last available analysis was recently provided by
the Chamber of Shipping in their Manpower Survey published in
June 2002. This informs us that the average age for UK deck ratings
is 43 years and for engine room personnel the equivalent figure
was 43.3 years. This is also broadly in line with the results
of similar research presented by the London Metropolitan University
in the 2002 UK Seafarers Analysis. The London Metropolitan Analysis
found that the total of UK deck ratings over 40 was 65%, and for
engine room ratings it was 62%. Given that the level of training
for seafaring ratings positions has actually declined since 2000
the age profile will deteriorate further unless corrective action
is urgently undertaken by the industry.
The union would also like to place on record
that we believe in future shipowners will state that they are
hiring foreign national crews due to the fact skilled UK seafaring
personnel are not available. If current levels of training are
not substantially increased then this will inevitably become a
self fulfilling prophecy.
The tonnage tax is a policy measure that is
at the discretion of the Government and the employment link for
both officers and ratings needs to be enshrined in its structure.
All ships in the tonnage tax regime should employ solely UK seafaring
ratings and officers in all positions on board and training also
needs to be undertaken on every vessel. Otherwise we believe the
balance sheet will continue to be the sole determining factor
for crewing decisions for the majority of UK companies, ignoring
longer term considerations for retaining a maritime skills base
and the wider benefits that this brings to the UK maritime sector
and the national economy.
This "belt and braces" approach is
essential given the experience of actual training commitments
since the introduction of the tonnage tax concession in 2000.
RMT would also like to refer the committee to
the recommendations of the Environment, Transport and Regional
Affairs Committee Twelfth Report on the Shipping Industry in May
1999. The report expressed concern at the parlous state of the
industry and asked the Government to introduce measures to increase
the training and employment of UK seafarers, both ratings and
officers. Whilst the Government have clearly attempted to make
progress towards this objective the industry has not so far delivered
the results that were expected through the implementation of the
tonnage tax.
CONCLUSION
When commentating on the employment and training
link in his 1999 report Lord Alexander stated that "The
industry's offer clearly demonstrates a determination to increase
training and employment and to try to meet the need for trained
officers. But there are nonetheless concerns as to its adequacy.
The formal link of the tonnage tax to training alone would not
satisfy demands for trained and experienced officers in related
sectors. Its extra cost to the industry of about £4.5 million
a year after five years is small when compared against the financial
and other advantages of the tonnage tax. The commitment to ratings
is less than the RMT would wish. I therefore asked the industry
and the DETR to explore together the prospect of further commitments."
With the exception of the ratings to officer
conversion courses, 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.
It is now apparent that the future employment
prospects for UK seafaring ratings is dependent on Government
being more pro-active in ensuring that UK seafarers have a future
in the UK Fleet. There must be a clear link between the training
and employment of UK seafaring ratings and the tonnage tax. It
is also apparent that the link for UK officers needs to be strengthened.
Unless this is done, the haemorrhaging of skills
from the UK maritime sector will continue. It is essential that
the link should provide a clear, unequivocal commitment to the
employment and training of UK seafaring ratings.
We hope that the Transport Committee will give
full consideration of this paper and we look forward to giving
evidence to the committee later this month.
June 2004
| 
