UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 630-i

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Transport Committee

Maritime Strategy

Tuesday 10 September 2013

Stephen Hammond, Sir Alan Massey and Ian Woodman

Evidence heard in Public Questions 1 - 45

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Oral Evidence

Taken before the Transport Committee

on Tuesday 10 September 2013

Members present:

Mrs Louise Ellman (Chair)

Mr Adrian Sanders

Graham Stringer

Martin Vickers

________________

Examination of Witnesses

Witnesses: Stephen Hammond MP, Parliamentary Under-Secretary of State, Department for Transport, Sir Alan Massey, Chief Executive, Maritime and Coastguard Agency, and Ian Woodman, Director of Maritime, Department for Transport.

Q1 Chair: Good morning, everyone, and welcome to this session of the Transport Select Committee in these splendid surroundings, which have something to offer beyond our usual venue in the House of Commons, at the beginning of London international shipping week, a very important event showcasing the importance of London in the maritime sector. It is a showcase to the rest of the world.

We welcome the Minister and his team who are with us this morning. Minister, would you like to introduce your team here today? I know that you want to make an opening statement, and I invite you to do that.

Stephen Hammond: Thank you, Chair. I have with me Sir Alan Massey, who is the chief executive of the MCA, and Mr Woodman, who is the director for maritime in the Department for Transport.

If I may, I would like to make an opening statement. I would like to start by re-emphasising that the Government’s focus on transport is as an engine for economic growth, and we see the maritime sector as a crucial enabler for trade, which will drive growth and will also be a key contributor to the UK economy in its own right.

The strategy is therefore to ensure that this country has both international maritime connectivity and that our maritime sector continues to flourish. That includes the business services sector. We have excellent international connectivity and a highly efficient, diverse port sector offering importers and exporters links to every part of the world.

The Committee will have noticed how much the eco-port sector is continuing to invest to ensure that we have the capacity that we will need in the future. Private sector investors have invested some £1.4 billion in UK ports in recent years, and a number of key developments are either completed or under way. We are widely recognised as a leading, if not the leading, maritime centre in the world, providing a wide range of services to international shipping. P&I clubs operating in London account for 62% of the global market. UK firms account for 50% of the tanker sector and 30% to 40% of the bulk chartering business. Lloyd’s Register is the second-largest ship classification society in the world. The UK accounts for 21% of maritime insurance premiums in the international market. We are a leading centre for legal and banking services to the maritime sector.

That is a huge range of expertise. Therefore, quite rightly, many shipping companies have shipping operations that they choose to base in the UK. I am determined that the Government will do everything they can to ensure that we hold on to that position as the leading maritime sector, by remaining competitive in a world where we recognise that there is increasing international competition in the global maritime business. That is why the Government, like the Committee, is so pleased to support the industry-led initiative of London international shipping week, the key purpose of which is to promote the UK as a place to do business.

Ministerial colleagues from across the principal departments-Business, the Treasury, the Wales Office, the Cabinet Office, and indeed the Prime Minister himself-will all be taking part in events this week, and I hope that the Committee will see that as a sign of a committed cross-government approach, supporting economic growth and particularly supporting this sector.

We have a wide range of policies in place to support UK maritime. The fiscal environment is stable, and an up-to-date regulatory regime allows UK ships to trade freely, with a balanced approach to securing growth while ensuring that there is effective maritime environmental protection and, of course, high levels of safety and extensive support for training and skills, which we recognise as important for ensuring the future of this country’s competitive position. That is why I was delighted yesterday, when we announced an additional £3 million to the end of the spending review period to support training in the UK, adding some 200 additional training places per annum.

I hope that the Committee will recognise that we as a Government have taken closer steps to achieving a more co-ordinated partnership between the industry and government. We have regular ministerial and industry round tables, which involve the active involvement of ministerial colleagues. We have held several of those meetings in the last six months, and a further one is planned for this autumn. That is a catalyst for some focus and coherence to policy and engagement.

One of the follow-ups from that is a key output from that strength and collaborative position: the development of the shipping and ports strategic partnership plans, which we published yesterday. I believe that we were able to share them with the Committee last week, and I think that they were sent to the Committee yesterday. It is the first time that the Government has set out quite so clearly the working relationship and how industry and Government might work together in partnership to deliver common objectives. We are well placed to deliver strategic aims and good international connectivity, ensuring that the 95% of goods that arrive and leave the UK by sea continue to reach their destinations quickly and efficiently, and that we continue to see the UK as the leading maritime centre in the world.

Q2 Chair: Thank you very much, Minister, for that statement. Do you have any more specific objectives for where you want the maritime sector to be in, say, the next 10 years?

Stephen Hammond: What we have set out, first of all, is that it is absolutely key for growth. There are some issues for some people about the constraints of growth, but I have set out a number of things. We want to ensure that we are the most competitive place to do maritime business in the world. That will involve continuing to look at the fiscal regime. We have a very attractive tonnage tax regime, which is widely recognised as probably the most attractive in the world. We have a very stable regulatory regime, working in close collaboration with both the EU and the IMO to ensure that the regulatory measures reflect the needs of safety in particular, but allowing business to continue.

I am keen to ensure that we have the best maritime environmental protection, balanced with the need for growth. The development of a number of offshore wind farms has shown that. We recognise that, if we are going to have a leading position, one thing is to ensure that we continue to commit to drive up our skills base, for ratings and for officers, but also in the professional services. If you look at those four strands, those will be the key to what I am hoping will be the key focus of our Government’s strategy over the next 10 years.

Q3 Chair: It is encouraging that the maritime strategic partnership has been set up. There has been a call from the whole maritime sector about the need to have a more cohesive approach between different departments and to develop ideas together. There does not seem to be involvement in that partnership by either the trade unions or professional organisations. Is there any particular reason for that?

Stephen Hammond: To a certain extent, there are the professional organisations on the industry side, with Jeremy Penn from the Baltic Exchange, Richard Sadler from Lloyd’s Register and, on a wider basis, Doug Barrow from Maritime London. All of them have sat on the two partnerships. Our officials have regular meetings with the unions. There is an issue about how wide and how big any high-level forum can be; otherwise, it loses its focus. We have been keen to ensure that there is a focus and a coherence. We have had a number of workshops, principally on the national contingency plan regarding safety, and the unions have participated in those workshops.

Q4 Chair: How are you going to measure success with the partnerships?

Stephen Hammond: The success will be measured in several ways. First, as the Committee will be aware, we have delivered strategic partnership plans, which were set out yesterday. They were worked up in consultation with the industry. One of the ways in which you will be looking to judge is to see whether we achieve those plans.

Secondly, one of the other key ambitions of the partnership is set alongside the ambitions for the 10 years that I have set out. One is to ensure that the UK maintains its competitive position as the leading place to do maritime business. We recognise competitive threats. Therefore, there are continuing issues that we will need to get right, but I am convinced that we will do that, working together with the industry, and ensuring that we have the trained maritime expertise in terms of ratings, officers and the professional base.

Q5 Chair: You have had ministerial and round-table discussions with a number of partners. Is there anything that has come out of those discussions?

Stephen Hammond: The key things that have come out of them are the strategic partnerships. Obviously, that has been some of the focus of the first two or three meetings that we have had. As you will also know, in addition to that, because of the concern that was expressed to me fairly quickly after I took over this job about the impact of the new sulphur regulations, I have held two summits of all parts of the industry concerned with how the new sulphur regulations might affect it.

Two things have come out of that. First, while still recognising the competitive threats to the ferry industry, we have had a better dialogue between the ferry operators and the abatement technology industry regarding the possibility of fitting that technology, which is colloquially known as scrubbers. There was initially some reticence from both sides to see whether there might be universal application, but we are moving towards that-but that is recognising that there is still a threat to the industry.

I have had a number of discussions with the IMO about what we might do to look at the review of the 0.5 2020 limit in relation to the availability of fuel. That is quite a productive outcome from that. There has also been a high-level round table on seafarer safety, which involved a number of groups. I did that in conjunction with DEFRA. It has not just been the strategic forum that has met several times; there have been other round tables on issues of particular interest to the industry.

Q6 Chair: Are those round tables going to lead to actions being taken? How are you going to make sure that that happens, and that those round tables are not simply where people talk about matters of concern?

Stephen Hammond: You can see the output of the first two rounds tables in terms of the strategic partnership plans. That is a real output that was not there, and it has come directly as a result of and with an impetus from those. A number of issues have been raised with us that are on the agenda to directly tackle. I very much thank BIS, particularly Michael Fallon. BIS has been instrumental in recognising how important these can be and has been working together with us.

I hope that there will be some announcements fairly soon on sulphur, which will be a direct result of this. You are quite right that there is no point in having these meetings just to have a cup of coffee once every three or four months. The key thing for us as Government is to ensure that our strategy is coherent, to support business and to recognise where the concerns are and to have some discussion about those concerns. At the next high-level round table, as a result of one or two things that were raised, we will be focusing on some of the issues that were raised and some of the issues that HMN and the Treasury may be able to help us with.

Q7 Graham Stringer: Less than half of ships owned in this country are on the UK register. Are you concerned about that? What can you do to improve it, and what would be the benefits of improving the number of UK-owned ships on the UK register?

Stephen Hammond: You are right. There has been a disappointing number of people on the UK flag. We as a Government would like to see a growth of the flag. A strong national flag gives the basis for a competitive sector. There are some immediate activities associated with the flag that I think are helpful in terms of technical specifications. Some of the work you can do in ship finance and law applications will make it a stronger and much better regulated industry. Equally, the existence of a strong international flag has a benefit in terms of employment. That is key. If there was a larger flag, we would have a greater influence in our negotiations on the international stage at both the EU and IMO levels. Therefore, I am keen to ensure that the conditions that would bring back a larger national flag would be in existence.

Q8 Graham Stringer: Why, then, does the Government promote the Red Ensign Group, which includes some of our competitors from British overseas territories and British dependent territories?

Stephen Hammond: If you look at the Red Ensign Group, all of them are on the Paris MoU, as I understand it, and they are on their whitelist. They do not particularly present a risk to the UK flag in that regard. I do not know whether there is anything that colleagues wish to say.

Sir Alan Massey: The category 1 Red Ensign Group registers, which are basically those that operate large international trading vessels, are all on the Paris MoU whitelist, which means that they are quite low risk. The whitelist is a kind of league table of better-performing flags. All of those flags, which are UK-Gibraltar, the Isle of Man, the Cayman Islands and Bermuda-are in visibly good positions. There is always a slight variation in performance-there will be from year to year. The analogy is having a family car. Some of them are quite old, like some of the ships that we take on the register that are old, and they are therefore more regularly the target of inspections, and they are more likely to have things going wrong with their lights and tyres. That is a classic case. Some of the registers in the REG have a fairly elderly age profile. That said, there is also strength and depth in the REG. The fact that the UK, as a flag, has a gross tonnage of about 16 million at the moment gives us a big voice at the IMO. We also speak for all of the REG countries, which boosts our tonnage to 50 million and gives us that much more clout.

It is true that we are in competition, so to speak, with REG registers or ships on the flag. On the other hand, keeping them inside the REG family means that you still have some influence over their quality and performance. We have a responsibility to protect them, and monitoring the performance of all of the flags gives us some control over that. We can take administrative measures against members of the REG if we want to so as to ensure that safety is brought up to the necessary standards.

Q9 Graham Stringer: The International Transport Workers Federation describes these overseas territories and British dependent territories as "flags of convenience". Nautilus says that registrations in those areas "damage the sustainability of the British shipping industry". What is the balance of advantage of having some influence-from what you say-against what the Transport Workers Federation are saying and what Nautilus is saying about the negatives?

Sir Alan Massey: "Flag of convenience" is actually an entirely neutral term, even though it tends to have negative connotations. It is used because of its advantages in relation to others. It is all to do with where the beneficial ownership of the ship sits. If it does not sit in the nationality of that flag, it is a flag of convenience. It is an entirely neutral term. It is true that, for all bar one of the REG family of flags, alongside the UK, they are not required to follow EU law in relation to terms and conditions or employees. That has some advantage in the perception of members. I see it as an entirely neutral term and part of the nature of global shipping.

Q10 Graham Stringer: But Nautilus says that they "damage the sustainability" of British-owned shipping by having British-owned ships flagged in those territories. Have you not done a balance of advantage of supporting this against not supporting it?

Sir Alan Massey: I don’t know. I am not aware that the MCA has done that. I don’t really understand what is meant by damaging the sustainability.

Q11 Graham Stringer: I suppose that you would have to ask Nautilus that, but that is what they are saying. I suppose that they are saying that all the advantages that accrue to the industry are less if there is less shipping than there otherwise could be that is flagged in this country.

Ian Woodman: In our view, it is very much in our interests if British shipping companies wishing to flag outside the UK, which they may wish to do for a whole variety of reasons, flag with high-quality flags. If they flag with the Red Ensign Group, as Sir Alan has mentioned, we are satisfied that the quality that is exercised remains extremely high. Sir Alan mentioned the MoU whitelist-so we would have UK ships still flying the Red Ensign and still operating under an IMO high-quality flag, providing safeguards about safety and performance, which, as Sir Alan mentioned, adds to our plan to bring them over as we try to negotiate a regulatory environment in which shipping can actually work. Although we would much prefer to have as many ships as possible under the UK flag, in a way, if they are under a Red Ensign Group flag, it is second best, but it is still better than giving them away to a foreign flag, potentially with a much worse standard of safety.

Q12 Chair: Doesn’t this affect employment conditions? Does having a flag of convenience mean that UK law does not apply? Isn’t that one of the problems?

Ian Woodman: If you fly a UK flag, you are subject to EU employment law. If you fly a Red Ensign Group flag, since those territories are not part of the EU, you are not subject to the same EU employment law. That can sometimes be an advantage for the shipping industry, and they will want to consider that very carefully in deciding where they wish to flag. If you flag outside the EU and outside of the UK’s dependent territories, you can obviously choose the employment parameters. We would see the ability to flag with the Red Ensign Group as giving the employer that kind of option while still maintaining that link to the UK and that very high standard of safety and performance.

Q13 Chair: Are you saying that this issue is something that does not concern you in terms of standards in shipping?

Stephen Hammond: We have said at the outset that we are keen to increase the UK flag as opposed to flagging elsewhere, and we continue to put in place measures or support measures that would support that position. We are keen, as ever, to increase the size of the UK flag.

Q14 Chair: The Government’s draft Deregulation Bill includes a clause which would amend the Merchant Shipping Act to allow changes in international agreements in the maritime sector to automatically take effect in UK law without being discussed by UK Ministers or in the UK Parliament. Why is that being done? Who was consulted on this? It appears to be something that could surely be to our detriment. There have been many examples where there are international or European proposals, which are currently discussed here in the UK and, as a result of that, they are interpreted in a way that is beneficial to the UK. Why does the Government want to keep the UK Parliament or Ministers out of the discussions?

Stephen Hammond: I am not sure that I recognise that as what the UK is trying to do. We were presented with a number of challenges under the red tape challenge in terms of deregulation. We found many measures that were suitable for that. Here in London, we are home to the IMO. We are a significantly influential player in that, and we are significantly influential in terms of what we do with engagement with the European Union. I do not recognise that the Government is trying to keep Ministers out of any of those discussions.

Q15 Chair: Why is the Government trying to do something that would put international treaties directly into UK law without the UK having its say? You mentioned earlier the issue about sulphur emissions. That was an example where there was a European proposal, and there were discussions in the UK-indeed, you were party to those, to try to change some of that so that the UK maritime sector would not be unduly harmed by it, and with some success. However, if there is going to be a system where international agreements go directly into UK law without any discussion by Parliament or Ministers, surely that is a very odd thing to do, and I wonder what kind of consultation took place before that decision was taken. The issue is currently being considered by a Joint Committee, so it is not law yet here, but it is what the Government want to do, and I was trying to work out the reason. It does not seem to make much sense.

Stephen Hammond: There are some international convention laws that we are bound to bring in but, in almost every case, there will have been a huge amount of Government influence or attempt to influence prior to those laws being set up. That would not change. We will continue to influence regulations and regulatory proposals, as we see at the IMO. As I understand it, at the moment there are about 240 workstreams at the IMO, and we have identified-Mr Woodman will correct me if I am wrong-I think 126 where there is a key UK interest and which we are attempting to influence. The idea that we are not trying to make sure that the UK position is protected or that the UK’s views are not heard is not right.

Q16 Chair: But this proposal means that Parliament would be cut out of the consideration. Who was consulted when you came to that decision to go ahead with the proposal?

Ian Woodman: The proposal arose out of the red tape challenge. It arose from a key industry ask. Where we are implementing international conventions-these are conventions where the UK will have been key part of the negotiation in the first place-we do so by what is effectively a mechanism of copy-out. The international convention is in place, and there are changes to it. Within the IMO, that are constant highly technical changes to the parameters of the conventions. They should be introduced into UK law, first, promptly, and secondly, by a simple process of copy-out, so that industry does not have to continually refer to UK legislation as well as the text of the convention. The easiest way to achieve this is to use a process of ambulatory references, which means that, when the convention comes into force and technical changes to the annexes to the conventions are changed, they would automatically move them into UK law. We already have to do this within the Merchant Shipping Act, and there is already a power to do this in relation to some safety changes to international conventions deriving from the IMO. They entered into force in merchant shipping notices issued by the MCA. This means that the same technique can be used for technical changes to the annexes to the conventions emerging from the IMO in other areas, for example seafaring rights or environmental protection. This is intended only to treat those highly technical changes. I can provide the Committee with lots of examples of what these-

Q17 Chair: But Mr Woodman, the proposal, as I understand it, is currently being considered by a Joint Committee in Parliament, and it does not specify technical things in the sense that they might not be of interest to Parliament. This is cutting the British Parliament out of awareness of the changes.

Ian Woodman: I am sure that, in debating the Bill, that would be precisely the issue that you would want to discuss and debate. We are interested in having a mechanism that applies these to what are effectively technical changes. There are very large numbers of these that are clogging up the system, and they are very difficult for everybody to deal with quickly and efficiently. That is what the proposals are limited to.

We are, of course, not suggesting that in any way that Parliament should be cut out of the process by which we negotiate difficult changes to key issues in the international regulatory framework for shipping, to which the Minister has already alluded. It is very important to us that Parliament is fully engaged in that. Indeed, Parliament’s opinions on such subjects are very important in relation to our ability to negotiate effectively, for example, within Europe. The proposal is indeed directed at those technical changes to IMO projects.

Q18 Chair: Are there any other proposals under consideration, Minister, which would affect the maritime sector under the same heading-the red tape challenge or deregulation? Is there anything else in the pipeline?

Stephen Hammond: Not that I am aware of. There has been a huge number of technical references, which Mr Woodman has referred to-there has been a backlog. That is partly because some of them had to be introduced by statutory instrument. By the process of ambulatory reference, we received considerable feedback from the industry in terms of how this would be a deregulatory measure, would speed up the process and would minimise burdens, but I am not aware of any other proposals.

Q19 Mr Sanders: How successful has the Government been in making use of local ports and inland waterways to reduce freight traffic on the roads?

Stephen Hammond: The Government has set out a proposal in terms of coastal shipping and inland shipping. Coastal shipping has increased. I accept that there is plenty of scope for greater use. As you rightly say, it reduces congestion and, potentially, noise and pollution. The key lies in ensuring that there is a mass of traffic so that there is a regularity to the service, which will continue to inspire it.

There are some geographic limits on the use of inland waterways but, if you look at Peel Ports in terms of the Manchester Ship Canal, they have ambitions to do more. Ports continue to invest in rail. Indeed, the Government continues to invest in access to ports via rail, principally in some of the work that is being done at Southampton and some of the work with the new real container terminals being built at Felixstowe. That is being put together by investment through Network Rail’s strategic freight network.

Q20 Mr Sanders: Do the statistics now show that the volume of domestic waterborne freight has been in decline?

Stephen Hammond: In terms of inland, yes. There are two issues. One is that there are some geographic limits, but if you look at the encouragement on the Thames, particularly Crossrail, which has been taking almost all its spoil out by water down the river, the new Blackfriars Bridge, which Network Rail initially had some concerns about regarding how they were going to get all the metal supports in-that all came in by the river. The Thames, in particular, has seen an uptake in-

Q21 Mr Sanders: But those are one-offs, are they not, because of Crossrail and other particular projects?

Stephen Hammond: One-offs lasting four or five years.

Q22 Mr Sanders: Is there a strategy to try and have a year-on-year or decade-on-decade increase? At the moment, we have seen a 20% fall over the last decade in domestic waterborne freight.

Stephen Hammond: There is, as you know, the waterborne freight grant. Because of the state aid clearances, that will come to an end in March 2015. We will be looking at the need for that grant, assessing how much impact that has had, what we can do in terms of seeing whether that grant effectively delivers the ambition to have more coastal and short-sea shipping, as well as inland shipping. The costs of moving freight by this means are more expensive at the moment. Therefore, we have to see whether the grant will bias it against roads.

Q23 Mr Sanders: Are there any additional incentives that the Government could put in place?

Stephen Hammond: We will have to be considering, post 2015, whether or not to continue both the waterborne freight grant and the modal shift revenue support grant. For both of those, we will have to look at the state aid clearance, but we could potentially look at that. We are clearly looking at the benefits of the mode shift grant in particular in terms of the environmental and social benefits of that, and whether that should be continued post-2015.

One of the key things that we can do is to ensure the excellence of the rail infrastructure in the UK and the access that that rail infrastructure affords. I am sure, Mr Sanders, that the complete reversal of certain retailers over the last five years in terms of moving freight by rail rather than by road will not have been lost on you.

Q24 Chair: The mode shift grant does not help coastal shipping, does it?

Stephen Hammond: No, but the waterborne freight grant does.

Q25 Chair: Are there any plans to increase the financial support for coastal shipping?

Stephen Hammond: As I said, the grants exist until March 2015. We have already started a review in the Department of the benefits of these grants. State aid clearance ends in 2015, so we will be looking at the need for those grants, what impact they are having, whether or not they are rightly targeted and whether or not they are achieving their ambitions. As I say, there are two things. One is what they do in terms of the operating costs that make it competitive against rail. It is also gaining a momentum. It is that amount or sheer mass of traffic that gives regularity and that will be a virtuous circle, which has not happened in terms of short-sea coastal shipping at the moment.

Q26 Chair: Does that mean that that is an area that you might be looking at?

Stephen Hammond: The short answer is yes, because we are conducting a review of it at the moment.

Q27 Chair: There is a lack of clarity in the Government guidance on who should pay for infrastructure and giving better access to ports. There is a view that the port authorities or the industry might be required to pay more for infrastructure access in local areas near ports. Could you clarify the Government’s position?

Stephen Hammond: It is true that, in certain other countries, there is not a requirement on ports to contribute to inland infrastructure. However, the UK planning requirement requires looking at detriment to others and the need to avoid that. That is not new, and it is not unique to ports. Planning obligations often put some obligations on ports to help in terms of ensuring that incentives are put in the right place.

The Department has tried to give clear guidance, but I accept that it is a complex issue. I accept that there are some timing issues-and sometimes the interrelationship between road and rail in terms of the benefits and what can be delivered, as well as coastal shipping. As part of the strategic objective and partnership plan that we put out, objective 2.5, we have committed to review that guidance to see if we can simplify it in terms of how it applies to ports, and we will be doing that in consultation with the ports industry. I hope to improve and clarify that guidance.

Q28 Chair: When do you expect that exercise to be completed?

Stephen Hammond: I would be misleading the Committee if I gave a definitive date, but there is a commitment to do so, and it would be disappointing if we had not made substantial progress within the next year.

Q29 Martin Vickers: Building on the infrastructure issue, as I understand it, because many other ports within the EU are either state or municipal owned, they qualify for certain EU grants that private operators such as ABP do not qualify for. Am I right in that? That is my understanding from local people in my constituency. Are the Government considering any action to try to improve on that?

Stephen Hammond: I will ask Mr Woodman to give you complete chapter and verse in a moment, but I do not think that that is right in terms of the description. However, it is right, and it is true for some UK ports, that either local economic partnerships such as they exist abroad, or certain local authorities in the UK, choose to give ports some economic support. Clearly, the UK port sector is largely private sector. We therefore think that it is right that there should not be those subsidies, and that the market should decide.

I will get Mr Woodman to clarify for you the point on the EU.

Ian Woodman: It is true to say that a port in any member state can apply for the same grants. The key difference is that other European member states municipally own their ports. There is also a suggestion that they are getting finance and support out of their municipalities, which is not available to UK privately owned ports. This is sometimes judged as acceptable state aid, although there are reservations about whether that is always the case. We would firmly like to see a position where there were no subsidies going into ports, which is a deeply private sector enterprise, and that this was a level playing field across Europe. That would be the ideal outcome that we would like to achieve across Europe. The Commission is considering some of these issues at the moment under its port services directive, although we have doubts as to whether the mechanisms that they back and that are being put into the draft regulation would actually achieve the outcome that they want to see.

Q30 Martin Vickers: Turning back to rail access to ports, Minister, you mentioned investment and so on a few minutes ago. I note the article in Rail magazine last month about access to ports, suggesting that rail freight operators are now more enthusiastic about electrification, because more of the network is or will be under wires. Are the Government actively pursuing a policy of trying to extend electrification to our ports?

Stephen Hammond: We have been actively ensuring that there is as good a rail access to ports as possible. Sometimes, that is not directly in the port; it is around the port. The substantial work at Northam in Southampton two years ago, for instance, had a huge impact on the investment in terms of the railway going into Southampton. You have seen new rail container works happening at Felixstowe. The Government, as you know, is committed to the largest programme of electrification, which will clearly impact on people’s decisions. It is key for the Government to make sure that there is good rail access to ports, and Network Rail have that in their strategic freight framework.

Q31 Chair: Does that mean that you accept that the Government should pay?

Stephen Hammond: No-we have just gone through the answer a moment ago about who pays for some of it. Clearly, the Government is the largest investor-quite rightly. It makes the largest investment in national infrastructure. However, I have made the point that it is a well accepted planning principle that, in certain cases where it may create a detriment to others, certain corporations or ports might pay. I have agreed that we need to clarify that guidance. That is why we are working with the ports to do so.

Q32 Chair: When you are seeking to clarify that, will you be looking at the competitive aspects in relation to ports in other parts of Europe?

Stephen Hammond: I am sure that that will be part of the consideration, but there are clearly key planning considerations in making sure that the clarity of guidance we give for ports is there. That would be the key thing that they want, almost invariably, across the array of where government touches the port sector-what they are asking for is certainty in the relationship, and that is what we are intending to give.

Q33 Chair: The independent review of Government support for training points to a skills gap in the maritime industry by 2021, and it suggests a skills gap of 3,500 deck and engineer officers at sea, 1,600 ex-seafarers ashore and 800 ratings. Why have current initiatives, including the tonnage tax, not dealt with the skills gap?

Stephen Hammond: If you look at how much support the Government is giving to maritime training, yesterday we announced a 25% increase in support for the maritime training scheme, which will allow an extra 200 places per annum. On the funded training so far, this year alone we will be training something like 775 new officer trainees, as well as 13 navigational engineering watch ratings. We announced an extra £3 million yesterday, which will, from 2013 onwards, allow for an extra 200 trainees up to March 2016. That is for trainees and officers of the watch, and for upgrading ratings to officers of the watch. The Government is making a fairly substantial commitment. Through the tonnage tax regime, some 320 officer trainees have been trained.

Don’t forget that, through the Government’s support for apprenticeships-this was made clear to me at a meeting with ABP and at a reception last night-they are now taking on increasing numbers of apprenticeships. The Government is making a large financial commitment to ensure that we close that skills gap.

Q34 Chair: What is the Government proposing to do? Are there any new initiatives? There have been announcements of additional funding, have there not?

Stephen Hammond: As I said at the outset of my answer, yesterday we announced a 25% increase in the funding for the principal scheme, which is the support for maritime training scheme, known as the SMarT scheme. That alone will make a huge commitment, with 775 officer trainees and eight ratings upgraded to officer of the watch in terms of this year. What that money will do for the next three years up to the end of the spending review period-we are not making a one-year commitment; we are making a three-year commitment-will be to make available an extra 200 training places per annum as a result of that extra money that we announced yesterday.

Q35 Chair: The companies that are unable to fulfil their training responsibilities under the tonnage tax scheme can make a payment in lieu of that. Is that something that has become a loophole, where companies are doing that rather than doing training that they could do if they wanted?

Stephen Hammond: We are keen to ensure that the tonnage tax regime continues to provide people with excellent training. There are clearly some people who have made that payment. I don’t think that it is a widespread loophole. If you look at the tonnage tax regime in the United Kingdom internationally, it remains the most competitive tonnage tax regime, and it still remains the most advantageous for training.

Q36 Mr Sanders: Can I ask about the incidents that there have now been twice involving non-oil substances that were washed up on the shoreline across the south coast, particularly in the south-west, in very distressing scenes that most of the country has perhaps not seen? It is very pertinent in the West Country. The RSPB tells us that the national contingency plan is unclear about the roles and responsibilities of different organisations in responding to non-oil pollution, and that this caused confusion when responding to what are described as PIB incidents this year. How can responses to non-oil pollution in UK waters be improved?

Stephen Hammond: I have to confess that I am slightly surprised by that. We had ongoing discussions and consultation with the RSPB. I was certainly at a meeting that they were at with the Maritime and Coastguard Agency, when we discussed the work that the MCA were doing. In a moment, I will ask Sir Alan to detail exactly what happened.

I have to tell you that there was the most extensive investigation by the MCA regarding the two incidents that occurred. We have spent a considerable amount of time with other Governments and international organisations and shipping lines trying to trace the source of the PIB. Unfortunately, after what can only be described as a very extensive investigation, there was no ability to trace exactly which ship it came from. We are also looking at the possibility-there is excellent work being done by the forensic team at the MCA about changes to PIBs in terms of their molecular structure-of bringing forward a paper to the IMO to upgrade those molecular structures. I am happy to ask Sir Alan to detail exactly what went on, if you would like to know. One of his heads of department came to London on two occasions and briefed Members of Parliament who had written to me about the incident, including a number of colleagues from the south-west.

Sir Alan Massey: We did hard work on two strands. One was the science of what actually happened regarding polyisobutenes or PIBs, which mask a whole range of different chemicals. On the science side, it has become quite evident to us, through analysis done at Plymouth University and abroad, that there is probably some class of chemical within PIB that is more dangerous than had been bargained for previously. It is to that extent that, as the Minister suggests, we are looking to put a paper to the IMO to consider whether something needs to be separately classified and designated as a hazardous and noxious substance and treated accordingly through enforcement and regulation. That work is still ongoing. It is hoped to bring a paper up to the IMO within the next two months.

The other strand that we pursued was the enforcement strand, trying to discover where this chemical may have come from, using satellite technology through the European Maritime Safety Agency and using our own tracking systems. Unfortunately, we were not able to do that-bearing in mind that PIBs, as a general class, can be discharged at sea under normal conditions-under closely controlled conditions-by ships on the basis that they are considered harmless if treated in that sort of way.

A third point is that all of these oil and non-oil pollutants are covered by the national contingency plan to counter pollution at sea, which is currently being revised precisely to look at mechanisms and frameworks in which we can operate with local authorities, shipping companies and non-government organisations such as the RSPB so as to bring to bear expertise quickly to deal with these things once they happen. It is not good that we lost thousands and thousands of seabirds on the south-west coast.

Q37 Mr Sanders: How difficult is it going to be to get international agreement to accept that these substances should be treated differently from the way that they are at the moment?

Sir Alan Massey: We have got to get the science right and assemble the evidence, as ever, and take this forward to the IMO with a view to expressing our well-researched opinions in the hope that we can gain a sort of consensus, as one always has to at the IMO, among other nations that recognise the threats that we are talking about and the need for some sort of regulation.

Q38 Chair: We hear from the International Maritime Organization that the UK has not yet ratified the convention on ballast water management. Why is that?

Stephen Hammond: I expect us to ratify that convention after the conclusion of the IMO’s work on enforcement. I am expecting that to take place in the early months of 2014. We have always been supportive in principle of the ballast water convention. We had some outstanding concerns about how, practically, it was going to be enforced, and about some of the sampling issues. We therefore pressured the IMO to put forward a framework which would ensure that there was a clear package of international guidelines on how they were going to enforce the convention, and to make sure that those run alongside, particularly in terms of inspection, before we were prepared to undertake ratification. I think that that work has been done by the IMO. As I say, I expect us to ratify that early in 2014.

Q39 Chair: Shipping is excluded from the UK’s carbon reduction target. Are there any initiatives or targets to tackle carbon emissions at sea?

Stephen Hammond: There are a huge range of techniques that the sector uses in terms of fuel saving. Some of those could be pursued at little or no cost. The slow steaming that you are seeing because of pressure on fuel costs, and also some of the environmental constraints, are putting huge downward pressure on emissions. That is probably the most efficient thing, but there are a number of other things that companies can do in terms of how a boat is cleaned, ensuring that the engine is properly tuned and so on, which help to ensure that emissions are kept low.

There are, of course, the standards that were adopted by the IMO in 2011: the energy efficiency design index, which looks at how ships are designed in terms of their energy efficiency in the future. The Government has been involved in a number of key EU groups, and to a certain extent some non-EU groups, looking at some of the further technical specifications ensuring that the technical standards reflect the need for new vessels to have lower emissions.

Q40 Chair: Is this issue seen as something important or something fringe? I don’t get any sense of urgency about it.

Stephen Hammond: I think that it is key. I am not entirely sure how we can express greater urgency, other than that we are committed to doing it. We are working with other nations. We are working on a whole range of issues about shipping, at the IMO and with other EU states. It is certainly a key part of the Government’s strategy to ensure that carbon reductions are clearly seen as important.

Q41 Chair: Is shipping likely to be included in setting carbon reduction targets in 2016, when this issue is looked at again?

Stephen Hammond: We will take a view on how effective some of the other measures have been. There is a major meeting of the IMO committee next spring, and we will be taking evidence from that and then reviewing the situation.

Q42 Chair: Are there any ways in which you think the Government and the IMO could work together more closely on addressing environmental issues in the shipping sector?

Stephen Hammond: We work extremely closely with the IMO. At the moment, we choose to work as closely as we can with the IMO on both regulatory and environmental issues. We recognise that, although there are clearly key EU interests, shipping is a global industry, and getting agreement at a global level is hugely important. We are recognised as an active and influential participant in the EU. The IMO has had good success on a number of issues on the environment, particularly on the energy efficiency design index, which was introduced in 2011, which has had quite a big impact. However, it is important to recognise that the IMO is a body where we need to use influence. It is a consensual body. It is therefore important that we remain a key player there, and it is important that we continue to work with it very closely, so that the EU position on environmental protection and other regulatory measures is heard strongly.

Q43 Chair: Are there any specific areas where you think more could be done by closer co-operation?

Stephen Hammond: When we make our arguments, we need to prove to the IMO and to other nation states that there is a clear, scientific basis for the environmental protection measures that we are proposing. Where we need to work closely is to ensure that that evidence is properly presented. I hope that you will see that we are working very closely on the issue of sulphur emissions. I continue to have regular meetings with the secretary-general about those matters. We are maximising our influence.

Q44 Chair: On a previous occasion, we expressed our concerns about changes and closures in the coastguard service. We will be debating that in Parliament shortly. We continue to receive a lot of representations from people in the sector with concerns about the changes that have been put in place. Do you have any current assessment of the changes that are now under way?

Stephen Hammond: Yes, my current assessment-I will ask Sir Alan to comment as well-is twofold. First, we have agreed with the Treasury the new job descriptions for the service. When Sir Alan and I gave evidence to you before, we made the key distinction that the migration of positions was to new positions, and these new positions offered greater opportunity for career, but also greater responsibility. At the time when we gave evidence, we were in negotiations with the Treasury to ensure that the new pay scales reflected that.

It has also been true that during this period there has been greater uncertainty in certain areas of the country, which has led to some people choosing to leave the service prior to us being able to recruit. There have been ongoing recruitment efforts, but there are now two key strands. One is to make final agreements with the trade unions to recognise the new positions and the terms and conditions that go alongside them, and then to migrate as many people who wish to move from their current jobs to the new positions, and in other cases to continue that recruitment exercise.

The second point is that the MOC, the national centre, will be technically ready for operation as from the agreed date in 2014. I see no technical barriers to that, and all of that workstream is on track. The key workstream at the moment relates to the first point, which is to agree the new job specifications and terms and conditions with the unions, and then to head to having a continual heavy recruitment process to ensure that we have those positions filled.

Q45 Chair: We are hearing quite serious concerns about the operation of the service, with the closures that have gone ahead and the closures that are planned. Sir Alan, do you have any current view on that? We expressed our concerns very strongly before, and we keep hearing about the matter.

Sir Alan Massey: We are not complacent, to begin with. The concerns that I have at the moment, if any, focus principally, as the Minister has suggested, on the people aspects, because the technical aspects are well under control. It is true that we are carrying vacancies, and I recall that we spoke about those the last time we met. We are carrying about a 15% vacancy rate. That is notwithstanding significant efforts to recruit. Part of the difficulty that we have is that, in the absence of an agreed way ahead with the unions on job specifications, pay and terms and conditions, it is difficult to recruit new members, and there are also problems with retaining some of the experienced staff.

That said, we have closed three stations, as planned. We have just gone through the busiest summer in recent history, with a 23% uplift in incidents. Up to now, no ball has been dropped, and the system has worked extremely well. I pay unreserved tribute to the professionalism of the staff who have made that happen. Where we have had stations that have been carrying particular vacancies at below-risk-assessed watch-keeping levels, we found our pairing arrangements, particularly those pairing arrangements between stations covering stations that are now closed-for example, Belfast and Stornoway are covering for the removal of Clyde-in those cases, the joint working has been exemplary, completely in line with our intentions and plans. In that sense, I am reassured. As I say, we are not complacent, and we are watching very carefully how manning levels are going at the moment.

Chair: These issues will be debated in Parliament shortly.

Stephen Hammond: Just before we leave that point, I pay tribute to and put on record the excellent and professional work that the MCA did in the Puma rescue recently, which I think was exemplary.

Chair: We had a session scheduled last week, which could not take place. It will take place in the autumn. Thank you, Minister, and your team, for coming and answering our questions today.

Stephen Hammond: Thank you.

Prepared 13th September 2013