Memorandum by the British Tugowners Association
(TT 08)
TONNAGE TAX
SUMMARY
The British Tugowners Association represents
the port towage industry in the UK. Of the 160-odd tugs operated
by its 15 operating group members, a large majority are currently
operating within UK Tonnage Tax—virtually all are on the
UK register and have fully UK crews. Newly published rules on
maritime state aids from the European Commission have unequivocally
ruled that seagoing harbour tugs cannot be included in such schemes;
the UK scheme will therefore be modified to exclude our members
and their vessels. Department of Transport and Inland Revenue
officials have confirmed that this exclusion is not desired by
them; they are working with us to ensure that the arrangements
for exclusion are the least harmful available. While it is too
early to identify specific effects on UK maritime employment and
support for the UK Register, undoubtedly these will be threatened,
and the effects on training may be more direct. This short memorandum
is to inform the Transport Committee of those unfortunate circumstances.
BACKGROUND
The BTA's membership of 15 towage company groups
runs 160 modern state-of-the-art tugs providing vital safety services
at all the UK's major ports and beyond. Virtually all these tugs
are sea-going vessels, registered in the UK and employing British
seafarers—about 1,200 in all. These vessels, while primarily
assisting vessels entering or leaving ports and terminals do spend
part of their time at sea beyond port limits and are available
immediately when required to assist with marine casualties. Furthermore,
it is important to note that the towage industry has developed
its own NVQ-based training schemes, fully within the STCW system
recognised by the MCA and the Merchant Navy Training Board.
The towage companies currently with Tonnage
Tax alone have about 60 cadets currently under training in accordance
with their commitments. Of the members' 160 tugs, more than 100
are operated by tonnage tax companies.
In 1999, it was clear that operators of sea-going
tugs were eligible to elect into UK Tonnage Tax, and the major
operators did so. Unfortunately, since then, cases before the
European Court of Justice concerning Dutch tugs operating in Germany
have established that port towage operations are not encompassed
by the special state aids rules for maritime transport, and the
European Commission has had little option but to reflect that
in the redrafted Maritime State Aids Guidelines published in January
2004. In order not to be in breach of these Guidelines, the UK
Government must implement the required changes in its statutes
by mid-2005; this will of course fall to Treasury rather than
Transport legislation.
Over the last five years, most of the towage
companies have made major investments based on the certainty that
the 10-year commitment to Tonnage Tax brought. Furthermore, during
this period, the ownership of two major companies changed hands
on terms reflecting that commitment. All those economic decisions
would have been assessed differently if exclusion had been foreseen.
The implications are therefore serious for the economic viability
of the operators and their value to investors.
This major development follows the equally unexpected
changes last year in the arrangements for seafarers' national
insurance contributions which have hit the industry with an additional
£4 million per annum in its operating costs.
We accept that, in relation to Tonnage Tax,
the Government's hands are tied by the EU's state aid regime.
Furthermore, we are assured by Department of Transport and Inland
Revenue officials that they will seek legislative changes that
will do the least damage possible to the industry. Nevertheless,
a reduction in training places can be foreseen and consideration
will undoubtedly be given to any possible benefits that might
flow from economies in the flagging or operation of the fleets.
Taken overall, we invite the Transport Committee
to take note of these developments with concern and to urge the
Government to take all possible steps to ensure that the inevitable
damage to this important sector of British shipping is minimised.
8 June 2004
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