Examination of Witnesses (Questions 20-39)
23 JUNE 2004
MR MICHAEL
PARKER, MR
MARK BROWNRIGG,
MR EDMUND
BROOKES, MR
MICHAEL HASSING
AND MR
MAURICE STOREY
CB
Q20 Chairman: 70%?
Mr Storey: Up to 70% on some ships.
Q21 Chairman: On those small things that
are blocking up every channel way between us and everybody else?
Mr Storey: I am afraid so.
Q22 Chairman: Have they suddenly got
an enormous wage increase? I had not noticed.
Mr Storey: No, but if you look
at the total running costs of a modern ship of today that is the
sort of figure that has come out. Therefore, we are faced with
a competitive situation internationally and rates of pay are dictated
by the ship that you are competing against and if you cannot compete
internationally then—
Q23 Chairman: You could give us actually
a note with those costs, could you, specified in relation to the
British fleet, 70% wage costs?
Mr Storey: We can give you the
costs breakdown of the running costs of the British ships.
Chairman: And the gold plating they have
got on the cabin doors, yes.
Q24 Mr Donohoe: But you are running down
a situation and the Chamber of Shipping has said that it is unrealistic
to expect the UK to have the ratings employed on deep sea foreign
ships. We have seen that and the Chamber of Shipping has said
that, and if one looks at the distribution of the seafarers by
nationality it has dropped from 2001 from 80% to 2003-04 to 42%.
It does not give any indication of confidence that there should
be in British citizens getting the jobs as ratings. On the basis
of what we said earlier, it does not seem also that you are giving
the careers structure that would attract people to come in as
ratings and move on. That is the difficulty.
Mr Parker: Could I just come back
on that. I do not make any bones about the fact that finding satisfactory
employment for ratings is difficult. There are opportunities,
as we have outlined, in the short sea and so on, but in the big
deep sea ships it is very difficult. The tonnage tax has had considerable
success with the increase in the number of cadets and what we
are also seeing, and we must not lose sight of, is the big increase
in the land-based jobs that comes with companies setting up here
for tonnage tax.
Q25 Chairman: It was because of the drop
in land-based jobs, as you know, Mr Parker, that all of this was
done because of the knock-on effect of losing the skills. So those
were the points being made by your own Chamber.
Mr Parker: Yes, and that is working
through. It is the cadets who will make the officers, who will
take some of the land-based jobs but there are also land-based
jobs that do not come directly from the seafaring skills but are
still important for employment in this country.
Q26 Mr Donohoe: Is the Chamber of Shipping
concerned about the erosion, even on what you say is the way to
maintain employment, on the ferries, for instance, that operate
short range? There has been a drop there and yet you have been
saying to the RMT, for instance, that that is the way to overcome
this problem. Yet if you look at even that sector there is a fairly
marked drop in that level of employing British citizens.
Mr Brownrigg: If I may answer
that. I think you have to look at each sector and its own merits
in context. When you are looking at the deep sea sector, shipping
is not alone. There have been many examples of other industries
and other sectors which have had to move whole operating bases
abroad in order to obtain the advantage of lower labour costs,
if you think of Doc Martins, Raleigh, Dyson and so on in the last
three years alone. When you look at the ferry sector in particular,
that too has got specific circumstances and the competitive position
in which that sector has found itself has changed radically in
the last five to ten years.
Q27 Mr Donohoe: If I take it to its natural
conclusion, as one must, then in terms of the costs being at 70%,
today it is the ratings, tomorrow it will be the officers who
are being employed from outwith the United Kingdom and in these
circumstances we have to ask ourselves the question as to why
it was that we did what we did with the tonnage tax. What advantages
do we get accruing to UK plc in the circumstances that your industry
is employing in the first instance ratings with foreign nationalities
being the mainstay today and perhaps tomorrow having the officers
employed on the same basis, from foreign nationalities?
Mr Brownrigg: Perhaps I can leave
the advantages specifically to Michael Parker in a moment.
Q28 Chairman: Mr Brownrigg, do you agree
on the 70% of the costs?
Mr Brownrigg: It will differ from
sector to sector, but in some sectors it can definitely be that.
Q29 Chairman: You think it is as high
as that?
Mr Brownrigg: But that is overall.
Q30 Chairman: So what is the balance
between operating and capital costs?
Mr Parker: Well, this will depend
on the ship. I think maybe it would be a good idea if we gave
you some examples.
Q31 Chairman: Yes, cost depreciation.
Mr Parker: The capital cost will
vary very much depending on whether it is a new ship or an old
ship.
Q32 Chairman: Obviously, but we have
just been told definitively that 70% of the costs are on wages,
so presumably Mr Storey is speaking from his experience of a wide
range of ships of all ages and size.
Mr Storey: Of operating costs,
Madam Chairman, I said.
Q33 Chairman: Only of operating costs?
Mr Storey: Only operating costs.
Q34 Chairman: Well, I still think we
would like to have a note on the difference between the operating
and the capital costs and we would also like to know about depreciation.
Mr Parker: I do not know if you
would like to hear from Michael Hassing, who has an international
view as MAERSK on the costs.
Q35 Chairman: Yes. Mr Hassing, do tell
us what happens with MAERSK.
Mr Hassing: Specifically on the
costs item, I think we have to be specific there on whether we
are talking short sea, deep sea or ferries and then I think we
would have to come with the facts because on the deep sea container
ships and tanker ships, etc., it is not 70%, it is lower. But
to come back to the question that was brought up, I would suggest
that the focus is put on the highly skilled personnel of the shipping
industry, and that is not the ratings. I think on the ratings,
from the competitive point of view the game has been lost already,
as has been explained and as you very well put it. But I think
as far as officers are concerned, the cadet programme, the junior
officers and the senior officers, that is where we as a nation
have to win because we are an island nation. 95% of our trade
is going via water and maritime London is actually a world-class
maritime cluster employing, I think, 450,000 people in the industry
and we really need to have a source of British nationals with
residence in Great Britain as officers, that is from the cadet
programme to the junior officers and all the way up through the
ranks, and that needs to be supported by the state. There I would
prefer to look at simply being competitive with the rest of the
countries in Europe, and I do not think we are. The focus should
be there because there is no reason why we are not competitive
because we have a world-class maritime cluster and we have incredible
good records with quality officers.
Q36 Chairman: If it is such a good quality,
why are so many Flags of Convenience vessels still around and
why is it that a number of ships are still on foreign registers?
Mr Parker: If I can answer that.
We should not be too depressed by the statistics that come out.
Q37 Chairman: Well, I am not easily depressed,
Mr Parker. I just want a reason.
Mr Parker: I think what we have
done with tonnage tax, and we should be pleased and proud about
it as a country, is that we have attracted a lot of companies
either to grow their businesses here or to move into this country
to set up operating bases to own and operate ships. A lot of those
companies that have come in have used other flags around the world
and are comfortable with them. They need to gain experience and
comfort of working with the British flag. It is true to say, as
I think we all know, years ago the British flag had a poor reputation
in terms of its usability from a shipping line point of view.
A huge change has taken place in the last few years in parallel
with the tonnage tax, which was part of the Government policy,
and I think the fact that we have got 65% now of the tonnage that
is controlled in the UK, two-thirds effectively, on the British
flag is actually a remarkably good achievement and I think that
proportion will grow as people grow in confidence in the improvements
that have been made with the British flag.
Q38 Chairman: So you would not agree
with the figure that says at the start of 2004 it was 38% of total
trading tonnage on the register, which is an improvement from
the 29% at the start of 2001 and 24% at 1999 but not as startling
as the figures you have just given?
Mr Parker: I have not got them
in front of me now, but I was looking at the deadweight tonnage,
which is what is between the low point in 1999 up to now, and
if one looks at that against the proportion on the British flag
it is two-thirds. We should actually be rather pleased because
what we have actually done is provide a system through tonnage
tax which is not flag-linked, which we felt as the Chamber was
very important, not to frighten people away. We have given people
that flexibility and two-thirds of the tonnage is on the British
flag now and I think it will grow.
Q39 Miss McIntosh: What is the percentage
of UK trained officers on UK flag ships as opposed to foreign
trained officers?
Mr Parker: Probably quite small.
I do not know whether we have any numbers, but we have got to
face the fact that in the run-down over the 25 years the number
of British officers declined, which was one of the worries when
tonnage tax was introduced. The only way we can get more British
officers is to start training them and that was the reason why
we had the cadet requirement in the tonnage tax. That is working.
We have got a 40% increase in cadets and they will work through,
but the fact is there are not that many British officers to go
round at the moment and any of us here involved in the industry
know that if you want to recruit people to come ashore to help
maintain ships and so on you have to look jolly hard. We want
to see more of these cadets coming through. They are coming through
the system but it is a slow process. You do not reverse a gap
of 20, 25 years in three or four years. In fact we are only just
beginning to see a significant number of cadets coming through.
Mr Hassing: If I could just add
some comments to that question, because I brought my own figures.
For our company, we are having 800 officers and 514 of those are
British and we are training 140 cadets. Going back to the earlier
comment, just to support the President, when the UK tonnage tax
was introduced it was at the forefront competitive-wise in the
international arena and a benchmark to other European countries.
It is no longer and that is part of the reply. So other European
states have caught up and they have improved further. So we need
to be sure that we are narrowing that gap in order to stay competitive,
in order to employ the seafarers that you want to employ.
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