Examination of Witnesses (Questions 160-179)
23 JUNE 2004
MR DAVID
JAMIESON MP, MS
THERESA CROSSLEY
AND MR
PHILIP DONLAN
Q160 Chairman: Oh, so we are not talking
twenties here, we are talking of quite a sizeable number of ships?
Mr Donlan: We are talking of several
different types of vessels, including rescue vessels and I believe
ones involved in drilling operations, etcetera. Now, at the time
when we introduced tonnage tax the Government took a decision
that most of these specialist vessels would be excluded. We are
taking note of the representations that are being made and we
are doing additional research, looking at the numbers involved,
more precisely looking at the cost that might be involved and
assessing so that we can advise ministers what the potential benefits
might be if they chose to take them into tonnage tax.
Q161 Chairman: I will not hold you to
it, but what would you assume you are talking about, employment
aspects, when we are talking about the benefits?
Mr Donlan: The benefits would
have to be protection from perhaps third party competition, so
holding on to those UK employments, additional opportunities for
UK training (if there are any), etcetera.
Chairman: The Committee is suspended.
The Committee suspended from 5.03 pm to 5.20
pm for a division in the House
Q162 Chairman: Minister, you are most
warmly welcome back. Because you have been so patient we will
try no to keep you very long, but there really are some questions
we need to put. The ten year commitment to the UK tonnage tax
regime, is it going to be affected by the new state aid guidelines?
Mr Jamieson: I think, again, that
is another issue for the Treasury.
Mr Donlan: I cannot see any way
that the ten year commitment, which is a commitment on the part
of the entrance into tonnage tax, will be affected by the new
state aid guidelines.
Q163 Chairman: So you do not contemplate
having to defend this scheme to the EU institutions is really
what we are asking you, because one of the questions which you
may or may not have heard this afternoon is, is Her Majesty's
Government going to reconsider this scheme short of the ten year
period because if so that will destabilise the fleets in exactly
the way that we do not want to do. What we need to know from you
is whether you think that the European institutions who are coming
out with these state aid guidelines firstly are going to be able
to insist on them being equally interpreted across the twenty-five
Member States, and secondly whether their interpretation is likely
to affect the tax deal in this country? I know those are fairly
large questions but they are actually quite important.
Mr Donlan: And good ones, thank
you, Madam Chairman. Will we have to make some changes to the
tonnage tax as a result of these new guidelines? The answer is,
yes, we will have to tinker at the margins.
Q164 Chairman: What, tinker in the sense
that you will take in more categories of ships?
Mr Donlan: That is a small opportunity
in one area, specifically with aggregate carriers, but equally
there will be some moves slightly the other way, but I think the
main changes were those referred to by Mr Brownrigg earlier on,
that there are conditions imposed upon retaining any state aid
scheme which is not linked to an EU flagging and that will be
conditions of monitoring and, if you like, a commitment to maintain
where we are at the moment in terms of the proportion of ships
which are flagged within the EU.
Q165 Chairman: Yes, but we have already
been discussing earlier on this afternoon the question of ships
that are not EU states but are nevertheless benefiting from the
tonnage tax. Are you suggesting that the EU changes to guidelines
will make it more difficult for those firms or less difficult,
or will they be excluded from the scheme on the basis that they
are not EU flags?
Mr Donlan: The UK has a derogation
from the general principle in the granting of state aid that a
ship operator should be linked to EU flagging. That derogation
is not of itself threatened by the changes to guidelines.
Q166 Chairman: And how long will that
last?
Mr Donlan: When the guidelines
were issued it stated within them that they will be reviewed,
I think after another six years, so that is taking us some way
forwards.
Q167 Chairman: So our derogation would
go from now for another six years?
Mr Donlan: One would have to assume
that at this stage.
Q168 Chairman: So you can more or less
assume you would just be to the end of the ten year barrier, am
I correct?
Mr Donlan: The initial ten year
barrier, more or less, yes.
Q169 Chairman: Is there any other interpretation
on that that would modify our scheme in some way or another?
Mr Donlan: There is a significant
number of small changes made by the guidelines. Not all of them
will have any significant impact on the UK's tonnage tax and where
they do, where perhaps that might be unclear before we move to
make any change we would want to be certain by discussing with
the Commission precisely what they meant by those changes in the
guidelines and how they should be interpreted. It is clear that
all Member States will have to adopt the same guidelines and one
of the advantages of the new guidelines, I suppose, is that they
are in many respects clearer to interpret than the previous version.
Q170 Chairman: Yes, but it is very important.
You will be aware of some of the evidence which says that other
EU states interpret state aid and the support for the shipping
industry in a different way. Now, is there anything within these
guidelines which will either restrict our existing interpretations
or force us to move to another set of interpretations, or in any
way address what is a perceived gap, it may not be a real gap
but a perceived gap between our state aid and the state aid offered
by other EU states?
Mr Donlan: I think actually it
is not a case that different Member States interpret the guidelines
differently, it is that they implement their aid schemes within
the framework of the guidelines differently. They have different
aims, different objectives and they are seeking to address a different
population.
Q171 Chairman: Has the Department done
any kind of assessment of the effect of those interpretations
upon the schemes that are being applied across the 25 states?
Mr Donlan: I am not aware that
there is a thorough investigation, certainly within the Inland
Revenue.
Q172 Chairman: It would be quite important,
would it not, because if the Treasury is thinking of looking at
this whole tonnage tax, it is really quite important that the
Department can either defend what we are doing or suggest ways
in which it needs to be modified to protect it in relation to
other EU institutions?
Mr Donlan: I think that is one
of the purposes of the review that we are currently undertaking.
Q173 Miss McIntosh: Minister, do you
think it is fair to say that the tonnage tax has worked for officers
but not for ratings?
Mr Jamieson: The tonnage tax certainly
increased the number of people in training to be officers and
those companies, once they have been in three years, of course,
are training not just 1:15, it is in fact 3:15, a 1:5 ratio. So
yes, it has increased the number of people—and you have
seen the figures—quite dramatically, the number of people
in training. When the agreement was originally made there was
no agreement at that time other than for best endeavours to do
anything in terms of the ratings and that was not the intention
at the time, it was training for officer positions. But it will
inevitably be the case that some of the people who are ratings
will certainly train to be officers.
Q174 Miss McIntosh: The evidence we took
was that there is an allegation that there was a preference to
recruit Filipinos and Taiwanese and others on £1.52 per hour
rather than take a UK rating. Is the Department sympathetic to
that argument?
Mr Jamieson: Well, we are aware
that certainly in ratings it is an open international market.
Shipping is not a national issue, it is an international market
and the amount of influence we have on the people who are employed
on the ships is exceedingly limited, it is only in those areas
where there are work permits granted, but in the rest of the area
of shipping we have no competence and no UK law that gives us
any influence over who is actually employed. What we can do is,
if they are UK flagged ships, we have the ability to inspect all
the conditions of the ships, the social conditions. If they come
into our port, whether they are flagged on our flag or flagged
on a foreign flag, we can inspect them for those standards, but
other than that we have no direct influence over who is actually
employed on those ships.
Q175 Miss McIntosh: Thank you. Mr Jamieson,
I do not know if you would like to answer this or Mr Donlan, but
we hear from the British Tug Owners' Association that the revised
rules on state aid mean that the European Commission have unequivocally
ruled that sea-going harbour tugs cannot be included in a UK tonnage
tax scheme. Is that a problem now that they are not going to be
included?
Mr Donlan: It is an issue. It
is one that we are talking about closely with the British Tugboat
Owners' Association. It is something that we will develop a policy
on. Obviously our main concern is to ensure that any effect on
UK-based tugboat operators is as minimal as possible so that they
can get the best possible transition.
Q176 Chairman: What is the reason for
that exclusion? That sigh does not auger well, Mr Donlan!
Mr Donlan: It is a long story,
but the short version of it is that the European Commission took
action against the Dutch state aid to tugboat operators before
the European Court of Justice and were successful in that. The
effect of the ruling was that where tugboats are operating primarily
within ports and harbours then they are outside the scope of the
maritime transport state aid guidelines.
Chairman: I see. So tugs are nothing
to do with maritime matters. Well, that sounds like the normal
level of decision-making in the European Court of Justice! Thank
you for making that clear.
Q177 Miss McIntosh: Mr Donlan, I think
Denmark and some other Member States allow national insurance
contributions to be reduced for the employers on seafarers. Why
has the Treasury not approved such a scheme in addition to a tonnage
tax in this country?
Mr Donlan: That would be a ministerial
decision and not one I can have any idea on.
Mr Jamieson: Alas, it is not this
ministry that makes that decision, it is the Treasury that makes
that decision.
Q178 Chairman: Somebody might have given
you a hint of a reason though, Minister, might they not?
Mr Jamieson: I have had no hint
from the Treasury on this matter, Mrs Dunwoody.
Miss McIntosh: Has Mr Donlan had a hint
from the Treasury?
Chairman: Mr Donlan is saying no. I think
we have just got the equivalent of, "Not me, Guv."
Q179 Miss McIntosh: Or, "Yes, Minister.
No, Minister." Minister, could I ask you, are you concerned
that while the ships are getting younger the officers are getting
older? In the submission we have had from NUMAST the average of
officers in 1980 was 27 and now the average age is 47. I am not
ageist, Minister.
Mr Jamieson: Yes, it is true,
your first comment that the fleet is getting younger and the fleet—the
fleet we have on our flag we are talking about now—is much
more accurate than we had. Before about 1998-99 some of the vessels
on the register had actually gone out of commission and probably
did not even exist, so we have modernised the register, we have
brought it up to date and cleared out the ships that no longer
exist and we know now that the ships that we have tend to be a
younger fleet and a bigger fleet. Yes, it is a concern. It is
a concern right the way across transport—
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