Memorandum from the Independent Light
Dues Forum (ILDF) (DMNB 03)
INTRODUCTION
1. The Independent Light Dues Forum (ILDF)
is delighted to submit its written evidence to the Transport Select
Committee's inquiry into the draft Marine Navigation Bill.
2. The ILDF largely welcomes the Government's
draft proposals, and believes many of the measures for reform
are long overdue. There are a number of issues on which the ILDF
has reservations and would wish to see clarified or amended before
the Bill is introduced into Parliament in the next Session. These
are set out in paragraphs 6 to 16 below. We also set out in paragraph
17 our case that this draft Bill is an opportunity end the costly
anomaly of the Irish Subsidy.
BACKGROUND
3. The ILDF consist of representatives from
the following companies:
— NYK Line (Europe) Ltd; and
— "K" line (Europe)
Ltd, and NYK Line.
4. Light dues are paid by vessels using
UK and Irish ports, and cover the cost of navigational aids, including
lighthouses, light vessels, buoys, and beacons. In the UK, the
charge is currently 35 pence per net tonne up to a maximum of
35,000 net tonnes. All vessels below 20 net tonnes, tugs and fishing
vessels below 10 metres in length are exempt. Merchant ships pay
up to £12,250 per call.
5. The companies represented in the ILDF
contribute about 50 per cent of the annual revenue figure from
light dues.
THE DRAFT
BILL—COMMENTARY
6. The Marine Navigation Bill represents
the first opportunity for a very long time to update and reform
the legislation governing the management of navigational aids
around the United Kingdom. It is disappointing that an opportunity
has not been taken to carry out a major rationalization of the
lighthouse authorities (GLA's) to consolidate them into one today.
7. There would be very considerable administrative
and financial savings particularly in overheads. It cannot be
efficient to have three head office functions with all the costs
associated with such a structure.
8. It is worth reminding the committee that
apart from a nominal fee charged in Greece and Sweden, the UK
and Ireland are the only countries to charge a tax for the provision
of navigational aids. For many years, the general lighthouse fund
(GLF) has been used as the financial pool which all three GLA's
use to balance the collection of dues with the payment of costs.
9. Given the adverse impact of light dues
on the competitive position of large ships calling at UK ports,
it is clear that the current system discriminates against those
ships calling at ports in England or Wales. There is a surplus
of revenue in England and Wales derived from the collection of
light dues. There is a very substantial deficit in Scotland and
in Ireland.
10. Consequently the proposed changes to
the powers and duties of the GLA's must be seen to be applying
to an inherently unfair system which is why we believe that far
greater safeguards should be provided for all users. It is not
too late to look at the possibility of changing the constitutional
status of the GLA's to make them "not for profit", "not
for dividend" companies with a supervisory board which allows
users full representation. We return to this proposal again when
considering specific changes in the draft Bill.
11. Turning to the draft Bill and the powers
outlined in paragraph 3.2.1, clauses 12 and 13, we do not accept
the assertions made regarding efficiency and cost savings. The
savings which have been made result from the rapid advances in
technology and the automation of navigational aids, not from any
real improvements in reducing the overhead cost structures of
the GLA's. Indeed according to the GLA's corporate plans running
costs are forecast to rise by 4%, per year for the next seven
years, from £52 Million to £66 Million.
12. The extension of the powers to the GLA's
outside the current 12 mile nautical limit can be seen to regularize
a practice which has been operationally applied for many years.
We would ask if the £1.5 million costs already being incurred
are charged to the GLF as seems implied? If so, was this ever
a legitimate or legal charge to the GLF?
This clause seems to be a measure designed to
ensure that the GLF bears the costs of maintaining navigational
aids far beyond the current 12 mile limit for marking wrecks in
international waters thus relieving the Government of the responsibility.
Its cost impact is uncertain.
13. The proposals to give the GLAs powers
to undertake commercial work whilst seeming to benefit the users
must in practice be viewed against an unsatisfactory constitutional
model for the GLA's. Although not having the powers (it now seems),
we are aware of various initiatives which have been taken by the
GLA's to diversify their activities in the commercial area. The
provision of holiday cottages on surplus lighthouse sites comes
to mind. These activities were discovered through a series of
parliamentary questions in 2004/2005 and they did not seem to
demonstrate much commercial benefit, and they certainly exposed
the GLA's to commercial risk.
14. As the primary contributors to light
dues and the GLF, we do not believe that these powers should be
granted to the GLA's given the current governance arrangements
and we do not believe that the Government is the best organization
to assess the commercial viability of proposals submitted by individual
GLA's. It is time that the users be given an opportunity to exert
much more influence over the functions, efficiencies targets and
costs of the GLA if they are to remain the financial providers.
We would suggest that the Lights Finance Committee be completely
reconstituted to accept much greater independent user representation
and be given the powers to vet all commercial investment proposals
to ensure that they are going to lead to profits, nor losses.
The final appeal to the SOS could remain.
15. The proposals to amend the funding of
General Lighthouse Pensions, the provisions within clause 14,
are a cause for great concern. We have argued for many years that
the GLF carried too large a reserve to warrant paying for such
unforeseen contingencies as a national dock strike, but it was
never intended that the reserves be used for pension fund liabilities.
The GLA's have had pension arrangements for the most part mirroring
those of the Government's civil service. Pensions are index linked
and final salary in nature and costs have been deducted annually
from revenue. It has been assumed that the contingent liability
for any pension deficit would be met by Government without any
further call on the GLF. The proposed "letter of comfort"
from Treasury to the Department for Transport does not provide
that security. In addition, it is clear that the path is being
cleared to permit long term pension liabilities to be funded through
the GLF. We have no idea what this might mean in terms of future
liabilities to be imposed on light due payers but we are warned
that "short term costs" will increase. This is an entirely
unsatisfactory situation and is a further example of "taxation
without representation". The GLF should not be used by the
GLA's or the Government as a convenient "piggy bank",
to fund all costs and contingencies which arise. The time has
come for a change in the constitutional structure of the GLA's
to permit external scrutiny and control. Otherwise, let funding
become a general charge on taxation, a situation which applies
to most European maritime nations.
16. We have no comments to make on the proposals
regarding the removal of wrecks other than to say that in the
event of a failure to recover the costs associated with removing
a wreck from the shipowner, the State Party should bear the costs,
not the GLF. We are therefore unhappy about the provisions in
255 J, most particularly because it provides an easy fall back
solution for GLA's rather than having to pursue a difficult claim.
17. Finally, we believe this draft Bill
is an opportunity to end the costly anomaly of the Irish Subsidy.
According to the Department for Transport's recently published
"Review of the funding for the Commissioners of Irish Lights
Evidence Report" (DfT, February 2008) the GLF may be contributing
around £8.5 million per annum to the funding of the lights
in the Republic of Ireland. As a result the rate of UK light dues
is higher than would otherwise be the case, and the rate of light
dues in the Republic of Ireland is correspondingly lower. This
subsidy of a public service (including their pension liabilities)
in another County is not only anachronistic, but it also constitutes
a heavy financial burden on the GLF and an unfair burden on UK
shipping. We suggest the draft Bill should propose an amendment
to Article 211 of the 1995 Merchant Shipping Act, removing the
obligation on the Secretary of State, and the GLF, to pay for
the provision of navigational aids in the Republic of Ireland
(under the corresponding part of the 1894 Act.)
CONCLUSION
18. To conclude, the ILDF welcomes the general
thrust of the Government's proposals but the issues set out above
represent real concerns which the ILDF believes must be addressed
before the legislation is in its final form.
19. The ILDF would very much welcome the
opportunity to give oral evidence to the Transport Select Committee
to explain more fully the position of the Forum.
June 2008
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