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2 Jun 2009 : Column 12WH—continued

Mr. Leech: I thank my hon. Friend for his intervention. I agree that the issue needs to be considered in the context of the overall costs for the shipping industry.
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The shipping industry will obviously try to fight its corner as much as is humanly possible. That is reflected in the letter sent by One Voice to the Secretary of State.

Will the Minister accept that there is a danger that the increased charges could be more than offset by a reduction in ships if the doomsday scenario set out by the shipping industry came to fruition? If that were the case, would the Government intend simply to increase light dues again to offset the losses made as a result of ships not going to and from British ports?

Are these hikes in charges really acceptable during a recession? The loss of direct calls by deep-sea vessels would make UK trade more expensive, with cargoes attracting additional terminal handling charges at the transhipment ports. There would be a serious risk of economic activity and jobs transferring to continental ports if that happened. At a time when hundreds of thousands of British workers are losing their jobs, the industry is understandably concerned about the impact that the proposals will have on jobs in the ports and shipping industry.

The Minister was able to announce a freeze in light dues last year, before the recession took a grip, and that was on the back of a reduction the previous year. Does he really believe that the industry can sustain these big increases now, at a time when the economy is on its knees? I am thinking back to the comments by the hon. Member for Liverpool, Riverside about the unprecedented economic difficulties that we face. Has the Minister considered postponing the charges, at least for this year, to give the economy time to recover, or perhaps phasing in the increases over a longer period? How does he react to the accusation by Martyn Pellew, group development director of Teesport operator PD Ports, who has accused the Government of trying to kill off the ports industry?

One Voice has also claimed that increasing the number of chargeable voyages will reduce the competitiveness of short-sea and coastal shipping, thereby increasing the risk of modal shift and more lorries on the road. What assessment has the Department for Transport made of the likely increase in lorry movements and the resultant impact on carbon emissions if that happened? Should we not be encouraging the use of short-sea and coastal shipping as a way of tackling climate change and cutting congestion on our roads?

The Minister is likely to argue that the increased charges, while unwanted, are necessary to bridge the projected £21 million gap between the income and spending of the three lighthouse authorities. Nobody can dispute that the money needs to come from somewhere, through either efficiency savings or increased charges. The hon. Member for Canterbury (Mr. Brazier) is likely to call for the merger of the three lighthouse bodies. The Liberal Democrats would not currently support such a merger, and there is probably little to be gained in the way of savings by doing so, given that significant cost-cutting measures have been taken already in the past few years—a point made by the hon. Member for Bolton, South-East (Dr. Iddon).

However, it is clear that a large proportion of the shortfall could be found if the Government delivered on their commitment in 2004 to end the annual subsidy of Ireland. One Voice calculates that it amounts to up to 75 per cent. of the projected deficit, and even the Government, in a parliamentary answer on 27 January, estimated more than £8 million being lost in potential
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savings in this financial year and about £30 million in the period since the then Secretary of State committed to ending the subsidy back in 2004. Will the Minister therefore give hon. Members a firm commitment on when the subsidy will end and offer some crumbs of comfort to an industry that will face real hardship if the charges are introduced now, during the recession? Will he also examine the viability of delaying increases in light dues, at the very least until the economy shows signs of recovery?

10.28 am

Mr. Julian Brazier (Canterbury) (Con): This has been a very interesting and thorough debate, with good points made in all parts of the Chamber. I particularly congratulate my hon. Friend the Member for Isle of Wight (Mr. Turner) on obtaining the debate and on taking a very long view indeed on the issue. As the son of a distinguished international yachtsman, I was very taken with the quote from Sir Thomas Sutherland with which he ended his speech. It reminded me of the time when the Kaiser caused an incident by turning up in London at very short notice off the boat train at Victoria. The embarrassed officials from Buckingham palace who met him told him that King Edward VII was on the Isle of Wight—my hon. Friend’s constituency—and he said:

When businesses face severe difficulties, there is a particularly strong onus on Government to minimise potential additional costs. As a number of hon. Members, including my hon. Friend, have remarked, the shipping industry has been particularly hard hit by the current economic turmoil. In January, Lloyd’s List reported that freight rates for containers shipped from Asia to Europe had hit zero, with customers paying just bunker rates and terminal charges. The Baltic dry index, which measures freight rates for bulk commodities, had fallen by 96 per cent. Those were desperate times, and things have picked up a little since then, but in mid-April Lloyd’s List was still reporting that 10 per cent. of global container ships were idle.

Shipping companies everywhere are busy analysing all aspects of their operations to reduce costs. Measures include service suspensions, slow steaming, service deviations, off-hiring chartered tonnage and lay-ups. Worst of all, many jobs are disappearing onshore and offshore. Last week, figures from Lloyd’s Maritime Intelligence Unit showed that 26 ships with capacity of at least 6,000 20-ft equivalent units had not moved in the past 19 days. Sadly, Coastal Bulk Shipping Ltd, which is based in Kent, has gone to the wall. The company operated a fleet of 13 vessels and was engaged in the extremely ecologically sound process of coastal shipping. It employed 90 people, but they have lost their jobs.

The hon. Member for Castle Point (Bob Spink) mentioned the fishing industry, and I know from constituents in Whitstable that it is struggling. Although DEFRA’s measures are welcome, they are only for the current year.

I have had discussions with several members of the independent light dues forum, the Chamber of Shipping and One Voice. I have also met managers at Trinity House and I am looking forward to visiting their depot in Harwich next week. None of us should doubt the
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difficulty or the magnitude of the task facing Trinity House and its two sister authorities. Britain is an island nation, and our sea lanes are our arteries. One of those arteries—the English channel—is the busiest shipping lane in the world. The Minister kindly arranged for me to visit the Maritime and Coastguard Agency headquarters near Dover, and I saw the printout of the shipping movements that took place at just one moment in time. It was impossible not to be impressed.

I must make it absolutely clear that Trinity House, the Northern Lighthouse Board and the Irish organisations do a first-class job. The Minister, the hon. Member for Orkney and Shetland (Mr. Carmichael) and other hon. Members are quite right when they say that nothing that we say or do should compromise the quality of the work that those organisations do. Nevertheless, as my hon. Friend the Member for Isle of Wight made clear, ships docking in the UK and the Republic of Ireland are paying light dues that apply in few other countries, including most other EU member states.

That brings me to the proposed increase in light dues. Trinity House informs me that light dues are now typically between 1 and 11 per cent. of total port charges and that they will go up to between 1 and 15 per cent. after the proposed increase. The planned rise ramps up fees from 35p to 41p per net registered tonne. For the largest vessels, the charge per call would rise by nearly two thirds to £20,000, and the overall annual cost would be even more if those vessels were frequent callers at UK ports. For smaller regular traders, the increase would be about 45 per cent.

In the current climate, the UK ship industry—shipping lines and ports alike—sees light dues as an albatross around its neck. I meant what I said when I stated that we must not compromise the quality of the work done by Trinity House, and there is no question of a future Conservative Administration expecting the taxpayer to pick up the bill for its work. However, we need to understand what the proposals mean for the shipping industry. To take one example, Maersk has told me that it will face an additional bill of £3 million per annum.

Light dues act as a cost multiplier. When shipping lines and ports are stripping out inefficiencies and costs, such a tax undermines UK competitiveness and retards the development of the UK’s short sea shipping market, as evidenced by the collapse of Coastal Bulk Shipping. Indeed, we risk losing stops at UK ports altogether. In the era of the ro-ro and the channel tunnel, containers can simply be unloaded at Rotterdam or other major continental ports and put straight on to the back of a lorry. That is bad for British jobs in ports, it is bad for the regions of our country and it is very bad for the environment in terms of not only CO2 emissions, but congestion pressures on the M25 and some of the most crowded parts of our road system. There is also a longer term threat to the City of London, as the world’s centre of excellence on maritime issues, if large amounts of trade shift from British ports.

I will not repeat the eloquent quote that the hon. Member for Manchester, Withington (Mr. Leech) read out from One Voice, which echoes concerns expressed by the Chamber of Shipping and many individual lines. Instead, I want to look at some of the effects on the industry. COSCO is pulling one of its big container
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ships out and moving its route to Rotterdam. Maersk is considering pulling five of its six container ships out of their bases in Britain, and Grimaldi and APL are considering similar action.

Light dues are one part of an accumulation of measures that the Government have recently introduced.

Mr. Carmichael: If, when the hon. Gentleman concludes, the Minister stands up and says, “Okay, these increases won’t happen. The pension fund costs and the operating costs can all be met from my Department’s budget,” does the hon. Gentleman really think that these shipping companies will not make the changes that he expects? Are they not perhaps operating in a wider economic context?

Mr. Brazier: The hon. Gentleman puts a perfectly reasonable question, but I tried to make it clear in the early part of my speech that the proposed increase is one of a number of factors. I will list some more of them, which have nothing do with light dues, but which have worked in conjunction with them to drive COSCO’s decision to base one of its container ships at Rotterdam rather than here.

We have had the debacle over seafarers earnings deductions for those employed in part of the maritime sector. We have had the Government’s plans for administered incentive pricing for spectrum frequencies, which vessels are obliged by international agreement to use for communication and navigational aids. Worst of all has been the destruction of businesses in many British ports because of the muddle over port rating. That is why I firmly believe that the Government must prevent light dues from becoming yet another nail in the coffin of British ports. We must look at a more imaginative way forward.

It is to the credit of Trinity House and its sister organisations that they have achieved a nearly 50 per cent. reduction in costs over the past decade. Now, however, they propose an 18 per cent. increase in costs over the next four years. Despite the fact that the general lighthouse fund was tasked by the Department for Transport with finding efficiencies, it forecast a 17 per cent. increase, and it has now come up with a slightly higher figure.

Much of the debate has focused on the Irish position, and I have exchanged a series of letters with the Minister on the issue over the past 18 months. As far back as 2004, the Government pledged to end this absolute nonsense, which has seen us pay roughly two thirds of Irish costs, but get roughly 15 per cent. of the value. As has been said, most of the deficit is accounted for by that single factor. How can that be right?

The hon. Member for Orkney and Shetland referred to pensions, and the position is actually worse. I stand to be corrected, but I think that the last lighthouse keepers to retire were all in Ireland, so a disproportionate amount of the longest end of the pension fund will apply to the Irish side. The 2007-08 GLF accounts recorded the pensions liability as follows: Trinity House, £136 million; the Northern Lighthouse Board, £72 million; and the Commissioners of Irish Lights, £130 million. That is a total of £337 million, of which more than a third goes to Ireland.

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The general lighthouse authority pension schemes are operated by analogy with the principal civil service pension scheme. That is a career-average, or final salary-based, non-funded, pay-as-you-go arrangement, although the GLF does of course have assets, which cover a portion of the liabilities. The GLA’s net pension expenditure in 2007-08 was around £14 million. I hope that the Minister, who has recently been to Ireland, will tell us today what steps he is taking, or, better still, give us a firm date for the stopping of the subsidy. In particular, what will the small print say about Irish pension liabilities?

Several hon. Members have referred to the fact that there are three lighthouse authorities, and have considered whether there would be benefits from amalgamating them. Considerable savings have been achieved by working together in several areas. However, how can there still be six lighthouse authority employees who earn more than the Minister? He is good value—a good man in a bad Government. Interestingly, five of the six are employed on the Irish side.

The chairman of the Transport Committee, the hon. Member for Liverpool, Riverside (Mrs. Ellman), made an interesting point about more opportunities for commercial operations by the lighthouse authorities. Trinity House generated more than £2 million last year, I believe, from other commercial sources. That income, of course, goes into the GLF, and already helps, in a small way, to reduce light dues. The hon. Lady discussed the possible scope for expanding that approach, and I hope that the Minister will say something about it.

As to the issue of capital expenditure, virtually every private sector organisation in the country, and certainly every one with an involvement in the maritime area, is looking at ways of pushing capital spending to the right. An independent review by C-MAR commissioned by the Government and the three lighthouse authorities concluded that the GLAs could manage with the residual fleet once Patricia is retired in 2012 but that, in order to provide operational flexibility and “surge capacity” for emergency response, another tender, similar to Pole Star, should be acquired to replace Patricia. Has the Minister considered the proposal? I am told that Patricia is not especially old. Is a replacement really necessary in the next three or four years? Is the decision driven by safety, or is it just following former practice?

No one should doubt the need for navigational aids, or the difficulty of the task and the professional requirements of those who manage our sea lanes so well, but at a time of desperate economic difficulty for shipping and our ports we have a strong duty to reduce cost pressures wherever that can be done safely. Ways should be found of curbing light dues without compromising safety, starting with Irish costs.

10.43 am

The Parliamentary Under-Secretary of State for Transport (Jim Fitzpatrick): It is a pleasure to see you presiding this morning, Mr. Olner, as other hon. Members have mentioned. I congratulate the hon. Member for Isle of Wight (Mr. Turner) on securing this important debate. It has been a useful discussion.

As well as the many aids to navigation that are maintained by the various harbour authorities, Trinity House has no fewer than three important historic lighthouses on or close to the Isle of Wight, at Nab
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tower, St. Catherine’s and the Needles, with another on the opposite side of the water at Hurst point. The general lighthouse authorities may be among our oldest institutions that have an unbroken history. Trinity House dates from 1514, but, as many hon. Members have mentioned, the authorities are not old-fashioned. The 11 staff in their joint research and radio-navigation department have a worldwide reputation. In the new headquarters of the Commissioners of Irish Lights I recently saw their high standard of work and the control room where one operator monitors and controls the lighthouses around the coast of Ireland. Their performance regularly exceeds the highest international standards for all types of aids to navigation.

Paying for the GLAs is a contentious matter, and I fully understand the points that have been made by many hon. Members. The general lighthouse fund was created in 1898 to replace a complex system whereby lights were provided by a mixture of the GLAs and private operators. It pays for the GLAs in the United Kingdom and the Irish Republic. The fund’s income is mainly from light dues paid by ships using ports in the UK and Ireland and from investment income. It contains £44 million of pension contributions from GLA employees, which is sacrosanct. We can use the investment income to fund pensions and other liabilities, but we cannot use it for capital funding or operating costs. We must also maintain a sensible reserve for operational expenditure or unforeseen and uninsured costs. There may be an argument for reviewing the present system of light dues and the general lighthouse fund because it has now operated largely unchanged for more than 100 years. I am wary, however, of arguments that aids to navigation and the GLAs are unnecessary for large modern ships, because it is precisely for their benefit that the deep water channels have to be surveyed and marked, and obstructions monitored and dealt with.

In February we published our light dues consultation. As many hon. Members have mentioned, for more than 16 years light dues have not been increased. They have been reduced on four separate occasions during that period. That has meant a decrease of over 40 per cent. in real terms—an enviable achievement by the GLAs. Few public or private bodies could claim to have equalled that. In April 2006 the light dues rate was cut by more than 10 per cent. in the knowledge that the new rate was unsustainable in the long term but that it was possible because of the relatively high level of the general lighthouse fund, good investment returns and significant windfall gains from asset sales. The reduction was made after consulting the Lights Advisory Committee, representing light dues payers, who said at the time that they would support a necessary future rise in light dues rates.

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