The
Committee consisted of the following
Members:
Brazier,
Mr. Julian
(Canterbury)
(Con)
Clark,
Paul
(Parliamentary Under-Secretary of State for
Transport)
Donohoe,
Mr. Brian H.
(Central Ayrshire)
(Lab)
Hewitt,
Ms Patricia
(Leicester, West)
(Lab)
Hogg,
Mr. Douglas
(Sleaford and North Hykeham)
(Con)
Holloway,
Mr. Adam
(Gravesham)
(Con)
Hunter,
Mark
(Cheadle) (LD)
Kilfoyle,
Mr. Peter
(Liverpool, Walton)
(Lab)
Leech,
Mr. John
(Manchester, Withington)
(LD)
McCabe,
Steve
(Lord Commissioner of Her Majesty's
Treasury)
Smith,
Jacqui
(Redditch)
(Lab)
Stuart,
Ms Gisela
(Birmingham, Edgbaston)
(Lab)
Tredinnick,
David
(Bosworth)
(Con)
Truswell,
Mr. Paul
(Pudsey)
(Lab)
Williams,
Mrs. Betty
(Conwy)
(Lab)
Wilson,
Mr. Rob
(Reading, East)
(Con)
Ben Williams, Committee
Clerk
attended the
Committee
The following also attended,
pursuant to Standing Order No.
118(2):
Carmichael,
Mr. Alistair
(Orkney and Shetland)
(LD)
Carswell,
Mr. Douglas
(Harwich)
(Con)
Goodwill,
Mr. Robert
(Scarborough and Whitby)
(Con)
Jenkin,
Mr. Bernard
(North Essex)
(Con)
Sixth
Delegated Legislation
Committee
Tuesday 15
December
2009
[John
Cummings in the
Chair]
Merchant
Shipping (Light Dues) (Amendment) Regulations
2009
4.30
pm
Mr.
Julian Brazier (Canterbury) (Con): I beg to
move,
That
the Committee has considered the Merchant Shipping (Light Dues)
(Amendment) Regulations 2009 (S.I. 2009, No.
1371).
Mr.
Cummings, may I say what a pleasure it is to serve under your
chairmanship for the first
time?
The
regulations put into statute the large rises in light dues
that were announced in a written statement on 10 June. The first part
of the statement increased light dues from 35p to 39p per net register
tonne from 1 July 2009. The second rise that is to come into effect
will push the price furtherfrom 39p to 43pwith effect
from 1 April 2010. In addition, the regulations will increase the
number of chargeable voyages from seven to nine. The overall impact on
many shipping lines will be severe.
The
backdrop to the statutory instrument, as the Minister will remind us,
is the general lighthouse funds £21 million shortfall. I
have had discussions with several members of the independent light dues
forum, the Chamber of Shipping and One Voice, all of which represent
users. I have also met managers at Trinity House and visited its depot
in Harwich.
None
of us should doubt the difficulty or the magnitude of the task facing
Trinity House and its two sister authorities. We are, of course, an
island nation, and the sea lanes are our arteries. One of those
arteriesthe English channelis the busiest
shipping lane in the world. The Ministers predecessor kindly
arranged for me to visit the Maritime and Coastguard Agency, where I
saw the printout of the shipping movements that were taking place at
just one moment in time. It was impossible not to be
impressed.
I
want to make it clear that Trinity House, the Northern Lighthouse Board
and the Irish organisation do a first-class job, and nothing that I say
today should be viewed as compromising my appreciation for the quality
of their work. Nevertheless, I hope to persuade the Committee to vote
against the measure.
Mr.
Alistair Carmichael (Orkney and Shetland) (LD): I am
grateful to the hon. Gentleman for giving way, because I have a point
about the core functions of the general lighthouse authorities. The
chief executive of the Northern Lighthouse Board told me in
terms:
While
we can all continue to search for further savings and efficiencies,
there will come a time when our essential safety related business will
be compromised. If the
EDM
early-day
motion 171, which is the basis for the hon. Gentlemans
prayer
succeeds
and the increase in Light Dues is revoked, then that time will come
very
soon.
Does
the hon. Gentleman take that warning
seriously?
Mr.
Brazier: I do indeed, but, rather than respond to the
point now, I urge the Minister to listen to my speech, because I will
deal with that point in some detail. I do not propose a cut in the
GLAs operating budgets.
We
are in the midst of the UKs deepest recession, and the shipping
industry has been particularly hard hit. Although things are not as bad
as they were in January, when Lloyds
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 industry is still a long way from being out of
the woods. 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. Jobs are rapidly disappearing onshore and
offshore.
In
October, Maersk, the UKs biggest maritime employer and trainer
of British seafarers, announced that it would withdraw 15 vessels from
the UK flag and that more than a third of its UK seafarer work force
would be made redundant. Its container shipping division lost $1.5
billion in the nine months before November. In the past few weeks,
Maersk has stated that it will not be recruiting western European
officers at all for the time being. According to the Chamber of
Shipping, Maersk now has approximately eight ships laid up in Greenock
and Loch Striven.
In
the current climate, the UK shipping industryshipping lines and
ports alikesees such rises in light dues as an albatross around
its neck. In a written question to Lord Adonis, Lord Berkeley
asked:
what
subsidies are paid by ships entering United Kingdom harbours to
maintain the navigation aids in the territorial waters of (a) France,
(b) Belgium, (c) the Netherlands, (d) Germany, (e) Denmark and
(f)
Norway.
The
then Minister of State, who is now the Secretary of State,
replied:
No
charges are imposed on ships entering UK harbours to meet the costs of
aids to navigation in these other
countries.[Official Report, House of Lords, 12
January 2009; Vol. 706, c.
WA128.]
With
the nation in economic crisis, why would the Minister want to make
things tougher for British ports and shipping lines? When shipping
lines and ports are stripping out inefficiencies and costs, this large
tax rise undermines our competitiveness, and retards the development of
the UKs short sea shipping market, as evidenced, for example,
by the recent 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 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, bad for the regional economies of our
country, and bad for the environment, not only because of
CO2 emissions, but because of congestion on the M25 and on
the other most crowded parts of our road system. In the long run, the
decline of shipping poses a threat to the City of London as the
worlds centre of maritime excellence, with the billions of
pounds it earns for us.
The truth is
that light dues are one part of an accumulation of measures that the
Government have recently introduced. We have had the debacle over the
seafarers earnings deductions for those employed in parts of
the sector. We have had the Government plan for administered incentive
pricing for spectrum frequencies,
which would affect internationally agreed wavelengthsI am
pleased to say that that has been largely withdrawn. Worst of all has
been the dreadful muddle over port rating, and I firmly believe that
the Government should prevent these rises in light dues from becoming
yet another nail in the coffin of British ports and British
shipping.
Instead, we
must look for a more imaginative way forward. This statutory instrument
is significant for the things it omits, as well as for those it
contains. The most significant omission is the issue of the continued
Irish subsidy. Via Government statute, the general
lighthouse fund passes £16 million to the
Commissioners of Irish Lights. That subsidy is private and not state
money, and is paid for by ship owners. The CIL uses it to pay for the
upkeep and maintenance of Irish lights. Apart from the small
proportionroughly 15 per cent.that relates to Ulster,
it is money that should not have to be raised by virtue of entering a
British port.
As far back
as 2004, the Government pledged to tackle this nonsense, which sees us
pay roughly two thirds of Irish costs for 15 per cent. of the value. I
first wrote to one of the Ministers predecessors, the hon.
Member for South Thanet (Dr. Ladyman), three years ago, in December
2006. His reply, dated 21 February 2007,
stated:
It
is important that we retain an integrated approach to the provision of
aids to navigation across the UK and Ireland but we must ensure that
contributions from each country are fair and justifiable and that an
equitable solution is
found.
Reinforcing
that is the evidence that the Irish operation, which enjoys civil
service pay scaleswhich are generous in Irelandis
expensive. For example, in an answer to a parliamentary question, we
recently discovered that four of the five most highly
paid
officials
across all three bodies are in the Irish service. At current exchange
rates and with the current level of the euro, £13 million of the
£21 million shortfall in the GLF is accounted for by the subsidy
element of the Irish payment. That alone would remove the need to raise
almost two thirds of the proposed rises.
I am sure
that the Minister will tell us in a moment that after his negotiations
with his Irish counterpart the existing 30:70 apportionment is to be
replaced by one of 15:85, with effect from the current year. However,
that still means that the UK is contributing half of the other 85 per
cent. Its contribution will fall only from 65 per cent. to 57.6 per
cent., bearing in mind the 15 per cent. of value that comes to Northern
Irish ports, principally Belfast.
The 2007-08
GLF accounts record the pensions liability as follows: Trinity House,
£136 million; Northern Lighthouse Board, £72 million; and
Commissioners of Irish Lights, £130 million. In other words,
almost two fifths of the accrued liability is on the Irish
side.
Issues
other than the Irish one need tackling. We should allow GLAs to expand
their commercial activities and use the revenue to subsidise light dues
for the industry. They already do that on a small scale, and would
therefore welcome that opportunity. The Merchant Shipping Act 1995, as
amended by the Merchant Shipping and Maritime Security Act 1997, allows
GLAs to use some spare capacity to carry out commercial activities,
which generated £2.3 million last year3 per cent. of
total revenue. Spare capacity is, however, tightly defined
as spare ship time and certain spare stores. The types of work that can
be undertaken are also laid down, and include maintaining buoys on
behalf of harbour authorities and carrying out surveys for the MCA.
Trinity House, for example, currently maintains the buoyage at Harwich
and
Felixstowe.
The
organisations would very much like the opportunity to expand their
commercial activities. In the past, the Government were open to that
idea, and they drafted legislation, which was incorporated into the
draft Marine Navigation Bill. Clause 13 of the draft Bill extended the
permissible scope of GLAs activities by allowing them, for
example, to enter into hire agreements for others to use their assets;
to enter into agreements for the provision of consultancy services; to
acquire assets for the purpose of entering into hire agreements; and to
be reimbursed from the GLF for expenditure incurred in connection with
an agreement. The proposals got a thumbs-up from the Transport
Committee:
"We
welcome the provisions...which will allow the General Lighthouse
Authorities to make more effective use of their spare capacity,
including the very considerable expertise of their
staff.
We
have made it abundantly clear to the Government that if they introduced
that legislation we would do everything we could to expedite it, so why
will they not give GLAs the powers to raise the money by that means,
instead of hammering the hard-pressed shipping
industry?
Let
me pay tribute again to Trinity House and its sister organisations.
Over the past decade, they have achieved a roughly 50 per cent.
reduction in costs and a large fall in manpower costs. Nevertheless, an
18 per cent. increase in costs is proposed over the next four years.
Some in the industry argue that there might be still further scope for
efficiencies, considering that other Department for Transport agencies,
such as the Highways Agency, are being asked to make 5 per cent.
year-on-year budgetary
cuts.
Be
that as it may, have the Government considered whether any overhead
savings could be achieved by amalgamating, for example, Trinity House
and the Northern Lighthouse Board? I am conscious that they have many
joint functions already; Trinity House, in fact, provides many of the
functions for both organisations. It is clear, by definition, that
there could be no amalgamation of the sharp-end operations, because
they are very much regionally based, but I wonder whether there could
be a further reduction in
overheads.
Nobody
doubts the need for navigational aids, or the professional requirements
and the difficulty of the task of those who manage our sea lanes so
well. The shortfall in the GLF is not in dispute, and nobody is
suggesting that we use public money to plug that gap. We all accept
that it has to be plugged, but at a time of truly desperate economic
difficulty for our shipping and ports, there is the strongest possible
duty on the Government to reduce cost pressures wherever that can be
done safely. Ways must be found of curbing the increases in light dues
without compromising safety, starting with a real attempt at tackling
the scandal of the Irish
subsidy.
4.44
pm
Mr.
John Leech (Manchester, Withington) (LD): It is a pleasure
to see you in the chair, Mr. Cummings.
I welcome the
debate on the regulations this afternoon. Hon. Members may recall that
we debated the proposed light dues in Westminster Hall back in June.
There is certainly concern in the industry that big increases are being
introduced at a time when the industry can least afford it. I am sure
that the Minister will point out that the charges have been kept low
for a number of years and that the increases will result in charges
that are no higher than at the peak, 16 years ago, and that in real
terms are 32 per cent.
lower.
A
do-nothing approach is not an option, but the Government could have
considered postponing the increases, or phasing them in over a longer
period. One Voice, the organisation created by the shipping, ports and
maritime business services sector, the member organisations of which
include the Baltic Exchange, the British Ports Association, the Chamber
of Shipping, the Institute of Chartered Shipbrokers, Maritime London
and the UK Major Ports Group, points out that increases of such
magnitude are almost unprecedented and, certainly, have not been seen
in the past 20 years. One Voice argues that there is a significant risk
that some ships will divert to ports on the continent, where lighthouse
costs are financed through public
expenditure.
In
a letter to the Secretary of State for Transport, the chairman of One
Voice, Michael Drayton,
said:
It
is clear to all of us from reading the proposals that there is a
fundamental misunderstanding of the economics of shipping: the
assumption that deep-sea vessels will continue to call at UK ports
regardless of cost is wrong. Several operators have stated that they
will reduce their direct calls at UK ports by 60 per cent., and others
are considering similar adjustments to their sailing schedules. Nor is
it safe to assume that a reduction in calls by deep-sea vessels inbound
from the Far East would be offset by a rise in calls by feeder ships.
Container operators could readily reorganise their services so that UK
cargo is trans-shipped at Rotterdam or another European hub and then
fed to/from the UK on other available deep-sea services. Once direct
calls by inbound deep-sea vessels have been stopped, they are very
unlikely to be
reinstated.
I
would be grateful if the Minister explained what assessment has been
made of the likelihood that the increased charges will result in
reduced direct calls at UK ports and of the financial impact if
operators reduce their direct calls by 60 per cent. Is there not a
danger that the increased charges could be more than offset by a
reduction in the number of ships? If that happens, do the Government
intend simply to increase light dues further, to make up for that
shortfall? The explanatory notes suggest that an additional sum of just
less than £20 million needs to be raised for 09-10, and
an additional £19.93 million in 2010-11. If there is a reduction
in the number of ships, is that money realistically likely to be
raised?
During
a recession, are such hikes in charges acceptable? The loss of direct
calls by deep-sea vessels would make UK trade more expensive, with
cargoes attracting additional terminal handling charges at the
transshipment ports. At the same time, there is a serious risk of
economic activity and jobs transferring to continental ports. 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
Government were able to announce a freeze in light dues last year,
before the recession took a grip, and that was after a reduction in the
previous year. Does the
Minister feel that the industry can sustain the big increases now, when
the economy is on its knees? Has he considered postponing the increases
or phasing them in over a longer period to give the economy further
time to recover? How does he react to the accusation by Martyn Pellew,
group director of Teesport, that the Government are 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 resulting in more
lorries on the road. Can the Minister tell the Committee what
assessment the Department for Transport has made of the likely
increase in lorry movements and the resulting impact on carbon
emissions? 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
hon. Member for Canterbury suggested that one of the options might be
to merge some of the lighthouse bodies. The Liberal Democrats would not
support such a merger and there is probably little to be gained by way
of making savings, given the significant cost-cutting measures that
have already taken place over the past few years. What is clear,
however, is that a large proportion of the shortfall could be found if
the Government delivered on its 2004 commitment to put an end to the
annual subsidy of Ireland. One Voice calculates that that subsidy
amounts to 75 per cent. of the projected deficit, and even the
Governments own figures from a Parliamentary answer, which I
think the hon. Member for Canterbury mentioned, estimate more than
£8 million being lost in potential savings in this financial
year, and more than £30 million in the period since the
Secretary of State committed to ending the subsidy.
Will the
Minister give a firm commitment this afternoon to an industry that
faces real hardship to try to postpone some of the future proposed
increases? Will we at least get some crumbs of comfort from the
Government for an industry that is very hard
pressed?
4.52
pm
Mr.
Douglas Carswell (Harwich) (Con): Thank you for calling me
to speak, Mr. Cummings. I am not a member of the Committee
and therefore all the more grateful for having the opportunity to
contribute.
Trinity
House is in my constituency; it is an important employer with an
important history in the town. I rise to speak up for it and to put its
point of view on the record. I fully respect the view that the
Government should not be forcing up light dues as is proposed, but I
want to place on the record the first-class job that Trinity House has
done in keeping its costs to an absolute minimum. It has been able
steadily to reduce the rate of light dues since 1993, achieving a 50
per cent. reduction in the past 10 years. Since 2005, for the duration
of this Parliament, Trinity House has cut its work force by 31 per
cent., its depots by 50 per cent. and its fleet by 25 per cent.
Expenditure has dropped by an average of 3.1 per cent. a year. If
Government had shown that level of efficiency, there would be no budget
deficit. Trinity House has achieved savings in the order of £170
million. That is no mean feat.
I fully
respect the position of ship owners and their need to keep their costs
down, particularly in the current economic climate, but the fact that
light dues currently
represent 1p of £100 worth of any imported goods brought in by
sea is thanks largely to the sterling work of Trinity House. I think
that that should be
acknowledged.
In
the next budget, for 2010-2011, Trinity House has offered proposals to
make a 5 per cent. savings in support costs. Trinity House, in short,
is a first-class operation. It runs a very tight ship. I think that the
solution to the problems we face is a more equitable settlement between
Trinity House, Irish Lights and the Northern Lighthouse Board. I hope
that perhaps one day we can explore alternative ways of raising revenue
and paying for light
dues.
4.54
pm