Examination of Witnesses (Questions 60-79)
23 JUNE 2004
MR MICHAEL
PARKER, MR
MARK BROWNRIGG,
MR EDMUND
BROOKES, MR
MICHAEL HASSING
AND MR
MAURICE STOREY
CB
Q60 Chairman: Are they at the moment?
Mr Hassing: No, they are not.
They are no longer. They were but they are no longer.
Q61 Chairman: What degree of change is
there?
Mr Hassing: It is the tonnage
tax, which it seems in other European countries—I am not
even talking about Asia—they have caught up with the UK
tonnage tax scheme and there are other benefits and incentives
which makes them more competitive than ours.
Q62 Chairman: So you could actually calculate
that?
Mr Hassing: We can calculate that,
yes. So we do have a number of specific issues where we know that
we are no longer cost-competitive. We do have some sister companies
that operate ships under the Danish flag and the Dutch flag and
the Singaporean flag.
Q63 Chairman: So you could give us a
note just from your own company point of view?
Mr Hassing: Yes, just to give
an impression. So if Denmark, for example, is costing 100 then
the UK would be 106, 107 for our particular ships and Singapore
would be 80, and most other European countries that we are competing
with will be on the same level as Denmark but the UK is on the
high level. It is issues like training, that the state supports
the training of cadets, but also the training of junior officers,
onshore training and training that is required for them to be
promoted to chief engineers and masters.
Q64 Chairman: Yes. It is a little difficult
to give extra training to cadets if the companies concerned are
not showing the slightest desire to employ them anyway?
Mr Hassing: We employ them but
at a higher cost and I am just suggesting that if this continues
for the next many years I can see why some companies will have
difficulties with this if they are not cost-competitive with other
nations.
Q65 Clive Efford: Is that not affected
by EU state aid provision? You are competing against, I think
you mentioned Danish companies, who are more competitive because
they are receiving government aid for training, is that right?
Is that affected by EU state aid?
Mr Brownrigg: It is affected by
EU state aid guidelines, but the other European regimes fall within
the state aid guidelines in regard to employment costs. Perhaps
I could come back to this whole issue on the basis that really
this is quite an early stage in the overall process to take any
definitive conclusions about the success or otherwise of tonnage
tax on employment because the tonnage tax has been in place for
three and a half years. The first year and a half of that was
taken up with people joining and the training commitments beginning
to bite. That means that the full flow of tonnage tax in training
commitment terms is only just now and over the last year occurring.
So that is one point. The second point is that there is a number
of companies, not just MAERSK, who have offered and are as a matter
of company policy employing their newly-qualified cadets; indeed
that is what we would hope all would do. It is not always possible,
according to individual company circumstances, and there were
one or two quite highly publicised instances of that. But the
generality, we believe, still have that intention, but we do not
know. That is why we have commissioned this research to find out
the current employment situation and to look forward to find the
best solution.
Q66 Mr Donohoe: Mr Brownrigg, you seem
almost to be arguing against your colleague Mr Hassing in that
respect, in that you are indicating that the tonnage tax at this
stage is only now starting to have an effect. He is indicating
that in a European-wide context the rest of the competition are
catching up because they have introduced some other schemes. There
does seem to be a bit of discrepancy in that.
Mr Brownrigg: I do not think there
is any difference in that. We already saw a change in the size
of the UK fleet before the UK tonnage tax came into place because
of the confidence inspired by the Government's decision to introduce
it. So I think the fact that people can see new tonnage regimes
elsewhere in other countries emerging gives them confidence to
take the opportunity to take a decision against that background.
Q67 Mr Donohoe: What is the next stage
in this process then to be maintaining a position to be ahead
of the competition in the rest of Europe?
Mr Brownrigg: I think the fundamental
point is that this country, having made a tremendous advance with
the UK tonnage tax and other thoughts at that time, has turned
around a 25 year period of decline and without that turn-around
we would now be, frankly, a third division player. That is the
reality. That has happened. The essential thing is that we do
not lose that shift upwards.
Q68 Mr Donohoe: So what do we introduce
not to lose it and at what stage?
Mr Brownrigg: Well, we ensure
that we do not introduce new restrictions which are going to chase
people away or drive people away, either from the UK as a shipping
base or from the flag, and we ensure that we have a positive and
practical fiscal and employment cost environment in this country.
Q69 Mr Donohoe: But I come back to the
point—and this is what Mr Hassing is saying, he is indicating
that the competition is now catching up?
Mr Brownrigg: Yes.
Q70 Mr Donohoe: What we need to then
look at is the potential for being able to improve the situation
beyond today, otherwise we are going to once again be in a position
of being at the back instead of being at the front?
Mr Brownrigg: Could I give an
example. In the discussions around the time of charting a new
course and the last round of debates on this there were a number
of employment cost measures which were put to Government jointly
by the industry (meaning ourselves, NUMAST and RMT). None of those
has actually been introduced. Some were in debate at the time
and some were accepted, and so there are elements of unfinished
business on the whole question of employment costs. In addition
to that, you have heard from Michael Hassing the suggestion that
our training costs are uncompetitive and our training arrangements
are uncompetitive with our continental counterparts. In the Netherlands,
for example, most of the training takes place within the state
system at no cost to the industry. In this country we have an
apprenticeship arrangement, which puts a large amount of cost
on the shipping industry. We would like to move more, not necessarily
to exactly the same arrangement, but we would certainly like to
see training assistance as part of the employment cost package
that we have been looking at.
Q71 Chairman: It is a little bit difficult
to realise why there should be this difference between states
which are supposed to be operating under the same legislation,
is it not?
Mr Parker: I think not. They interpret
it in different ways. They are all variants on a theme. I have
mentioned that I am involved with a French company which is entering
tonnage tax here. There are differences between the French and
the British system.
Q72 Chairman: I think that point has
been generally taken on board, yes. You have repeated again that
it is unrealistic to expect UK ratings to be employed on deep
sea foreign-going ships and that we should focus on short sea
ferry routes. Is that your view still?
Mr Parker: As far as ratings are
concerned, I think partly. But also, as I think Mr Brownrigg was
saying, there are opportunities in these closer to shore activities
like the dredgers and so on, and therefore tonnage tax in those
areas would be a help.
Q73 But from the point of view of Her
Majesty's Government these concessions were made with two specific
objects in view; one was employment, the second was training and
I suppose we could also say there was a third, which was the overall
management of the British tonnage. At this point what we are very
anxious to be able to assure Her Majesty's Government is that
those objectives have been achieved, because otherwise, not surprisingly,
the Exchequer are going to say, "Is this value for the taxpayers'
money?" Certainly when they have got a ten year commitment
I do not think that is a difficulty, but if you want a long term
commitment and you want to demonstrate that there is some purpose
in the tax you had better be able to produce the facts and figures
that go along with it. Firstly, you are telling us that there
is not a level assessment across the European nations, there are
different ways in which what you kindly call "interpretation"
is being used to ensure a certain degree of state subsidy to some
companies. That is number one. So the Exchequer might think that
is odd. There is very clear evidence that certainly in terms of
ratings we are not employing the same number of ratings, and we
are told that the real hazard is the cost of British seafarers.
Is this your view and how would you justify, therefore, the continuance
of a tax of this kind to the Exchequer?
Mr Parker: I personally do not
have any concerns that it is a justifiable thing to do. Without
it, we will not have a British merchant marine. That is very clear
in my mind and the industry has only just been rescued in the
nick of time four years ago, and without it we do not have this
maritime cluster that we have referred to here in London, which
so much else in terms of jobs and taxation lives off. So from
an Exchequer point of view, I think that is a real plus. The companies
that are here because of tonnage tax (and would go if tonnage
tax was unattractive) employ people here, they pay salaries which
pay income tax, they spend money, they pay VAT, etcetera. There
is a financial benefit and there are the jobs which are coming
through in the cadets and the officers to give us the maritime
experience for the future. I do not think we as a Chamber ever
indicated at the time of tonnage tax that there was a huge opportunity
for ratings. It is sad but it is a very difficult market.
Q74 Chairman: How many of your members
are paying a levy in lieu of taking on cadets?
Mr Parker: Very few.
Q75 Chairman: How many is "very
few"?
Mr Brownrigg: I think the Department
for Transport's assessment is that planned "PILOT" (which
is what this is called) is applicable in less than 2% of cases
and I think probably few in our membership. Could I revert to
the earlier—
Q76 Chairman: Before we get to that,
if ratings are in effect a lost cause, which is what you are suggesting,
how are you going to encourage your members to take on more cadets?
Mr Brownrigg: The cadets are for
the officers.
Q77 Chairman: You believe that you can
actually expand those numbers?
Mr Parker: Yes. The number of
cadets has expanded by 40%.
Q78 Chairman: Well, only because it had
gone down very consistently.
Mr Parker: Absolutely, but it
goes with the ships. If we do not have the ships, we do not have
the cadets, and what I think we will see, because we have not
reached a plateau yet in terms of the impact of tonnage tax, is
that the companies that are here in the UK now will add further
ships to their fleets—and some of my colleagues here can
talk about their own company plans and I can certainly talk about
mine—and every time there is a new ship there will be more
cadets.
Q79 Chairman: Yes, but you have just
explained to us the reason why we have fewer ships is that they
are getting bigger.
Mr Parker: We cannot avoid that.
That is modern technology.
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