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Session 2009 - 10
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Delegated Legislation Committee Debates



The Committee consisted of the following Members:

Chairman: John Cummings
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 further—from 39p to 43p—with 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 fund’s £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 arteries—the English channel—is the busiest shipping lane in the world. The Minister’s 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. Gentleman’s 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 UK’s deepest recession, and the shipping industry has been particularly hard hit. Although things are not as bad as they were in January, when 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 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 UK’s 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 industry—shipping lines and ports alike—sees 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 UK’s 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 world’s 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 wavelengths—I 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 proportion—roughly 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 Minister’s 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 scales—which are generous in Ireland—is 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 year—3 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.
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 Government’s 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
 
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Prepared 16 December 2009