House of Commons - Transport

Select Committee on Transport Eighth Report

5 Freight transport and the regions

91. According to the English Regional Development Agencies:

Freight transport plays a vital role in supporting and driving sustainable economic growth across the English Regions. It is a key part of the supply chain and the performance of the sector directly impacts on the ability of suppliers, manufacturers, distributors and retailers to compete in the global marketplace. Increasing the efficiency of freight transport is directly linked to improvements in productivity which in turn support and promote business competitiveness across the English Regions.[163]

92. We have previously noted that a national framework for ports development will stand or fall on the strength of its ability to bring port development and traffic to the regions. It is the job of Government to ensure that commercial interests sit within a strategic framework for national development and regional growth.[164] The Northern ports that gave evidence to our inquiry (Peel Ports and PD Ports) described some potential advantages of their development in terms of modal shift—that increased shipping to the North would reduce the requirement for goods to be transported by road—and relieving demand on the rail network, particularly in the Greater South East area.[165] Peel Ports says that the area within 50 miles of the Port of Liverpool has a population of nearly six million and generates some 15% UK container trade, yet the Port is only handling around 6% of UK container business.[166] As PD Ports pointed out, "the one element of infrastructure which we do have is the sea, which is available now. Roads and rail require a lot of investment to increase capacity and will take time".[167]

93. Peel Ports pointed towards the ports' own investment, arguing that the development of regional ports is in both the regional and the national interest.[168] The British Ports association were, however, concerned that Government intervention in the ports market could lead to uncertainty over where responsibility for planning additional capacity lies—with the ports industry or the Government.[169]

94. In its Ports Policy Review interim report the Government expresses its view that commercial port operators are best-placed to make decisions about where and when to invest in the ports sector and that there would be no additional benefit from a "locally or regionally determinative ports policy" as long as the industry "takes full account of both the adverse impacts and the benefits, locally and regionally."[170] It concludes that only in exceptional circumstances will the Government regard local regeneration as a justification for direct public subsidy to a port.[171] Peel Ports and PD Ports consider that the Government has indirectly encouraged the expansion of Southern ports through improvements to road and rail infrastructure connecting these ports with national rail and road networks.[172] The English RDAs told us that while the Government is active in looking at connections from ports to centres of economic growth in the North, there is a question as to whether the "quantum of investment" is available to bring about significant improvements.[173] PD Ports contended that decisions regarding Government investment through the Transport Innovation Fund could in fact be used to help promote regional ports.[174]

95. PD Ports calculate that it is possible to save up to £200 per container by shipping freight to the North East of England rather than transferring containers to lorries at one of the Southern ports, although it would be slowed. It gave us the example of Asda, which is now receiving freight by sea on the Tees and saving some 4 million lorry miles per annum, as well as saving on labour and land costs.[175] But we have heard before from the shipping company Mearsk that the reason port development has been focused in the south-east of England is the proximity to the main shipping routes from the Far East and Europe, and of its belief that "the market will make the right decisions".[176] We were told that shipping freight to the North is expensive and that to do so is less cost-effective than transporting containers by rail from the South-East, even though capacity is limited.[177] (Mearsk in fact considers that, unless more public money is made available to fund inland infrastructure in the Greater South East area, even these, the largest of the UK's ports, will eventually lose business to ports on the Continent, where such improvements are often centrally funded.[178])

96. The cost-effectiveness of shipping to the Northern ports could improve with the introduction of Post-Panamax[179] terminals at the Port of Liverpool and Teesport.[180] Peel Ports is confident that it will attract deep-sea ships to Liverpool that currently offload containers destined for the North in the Greater South East area. It believes that the choice it will be able to offer shipping lines will result in more effective competition between ports with stronger market forces, but it does not believe it is getting appropriate support from Government in making its investment. Peel Ports complained that it was getting no support for its investment in the forthcoming Post-Panamax terminal, even though it would bring wider benefits in terms of regional development and the environment.[181]

97. The Minister is content that market forces are acting appropriately:

I recognise the issue. I do not recognise it as a problem. Were there no investment taking place at all in the North, then I would recognise that as a problem. Given that we clearly have investment in the North, we are in a competitive market worldwide.[182]

He pointed towards the Government's approval of planning applications for Post-Panamax facilities at Liverpool and Teesport but emphasised the importance of providing facilities in the Greater South East in order to retain international competitiveness.[183]

98. It is clear that the UK's geography will encourage growth in demand for ports capacity in the Greater South East area. But the Government must be careful not to intensify that tendency by distorting the market with its decisions relating to inland access and planning. It should realise that supporting port infrastructure in the regions assists regional regeneration as well as the national interest. We are not convinced, for instance, that in allocating a large proportion of the Productivity Transport Innovation Fund to schemes in the South the Government has taken the full range of costs and benefits—including regeneration, employment and potential environmental gains from modal shift—into account. It is worrying that the Department does not seem willing to consider the implications of its decisions for regeneration.

99. While being mindful of the international competitiveness of ports in the South East and that it would be undesirable to be left with under-utilised infrastructure, the Government has the power to enhance the commercial viability of shipping to the regions by investing in improved infrastructure, particularly for inland access to ports. Increased capacity could lead to reduced transport times and costs for operators wishing to ship freight directly to the North, relative to transferring containers onto trains or lorries in the South East. The policy of making an ever-greater investment in infrastructure to cope with demand in the South East, although it might temporarily mitigate the congestion caused by an insatiable demand for new capacity, is not sustainable. In fact, it looks remarkably like the old "predict and provide" policy for road capacity. Without directly intervening in the market, the Government has the ability to effect changes to the relative viability of operators' options. It has embraced the idea that, if the freight industry is left entirely to the market, a system resulting in the perfect, most efficient transportation of freight will emerge. However, that approach ignores other priorities, such as regeneration, employment, the wealth gap or the environment. The Government should not be a helpless bystander.

163 Ev 184 Back

164 Transport Committee, The Ports Industry of England and Wales, HC 61, Session 2006-07, paras 57-59 Back

165 Ev 116, Ev 126 and Qq 182, 222 & 233 Back

166 FT 17, para 6.1 Back

167 Q 182 Back

168 Q 222 Back

169 Q 232 Back

170 DfT, Ports policy review interim report, July 2007, page 1 Back

171 DfT, Ports policy review interim report, July 2007, para 13 Back

172 Ev 126 and Qq 186, 222 & 223 Back

173 Qq 13 & 14 Back

174 Q 222 Back