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House resumed. Committee to begin again not before 4.21 pm.
21st Report Merits Committee
Merchant Shipping (Light Dues) (Amendment) Regulations 2009
That this House regrets that the Merchant Shipping (Light Dues) (Amendment) Regulations 2009 (SI 2009/1371) do not prevent Her Majesty's Government subsidising Irish Lights and thereby increasing light dues payable by ships entering United Kingdom ports.
Lord Berkeley: My Lords, first, I must declare an interest as a harbour commissioner for the port of Fowey in Cornwall, which operates its own lights and receives revenue from ships entering the port. I am also president of the United Kingdom Maritime Pilots' Association, but I should tell the House that both interests are unpaid and there is no financial arrangement of any kind binding me to a particular point of view on behalf of a body outside Parliament.
It is worth pointing out that this is not a fatal Motion. It is designed to express regret, and I hope that the debate will flag up the urgent need for the Government to resolve the question of the lights and the funding for lights going to the Irish Republic, which I shall explain. The light dues system works on ships entering UK ports. They pay light dues set by the Government, and this statutory instrument is the latest increase, which I shall come on to. The light dues are used to fund the main navigation aids around the UK coast. They are paid into the General Lighthouse Fund, which in turn funds the three general lighthouse authorities-Trinity House, the Northern Lighthouse Board and the Commissioners of Irish Lights, which provide services to Northern Ireland and the Irish Republic.
The issue that I want to raise this afternoon is that dues paid by ships entering UK ports contribute some £15 million a year to the maintenance of lights in the Republic, which is rather unfair on ships coming into UK ports.
It is not surprising that the Irish lights question goes back some 100 years and that there has been much parliamentary scrutiny of it. I have found some interesting historical comments in the debate on the Merchant Shipping (Mercantile Marine Fund) Bill on 17 March 1898, in which Sir Charles Dilke, MP for Gloucester and the Forest of Dean, criticised both the Northern Lights Commissioners and the Commissioners of Irish Lights. He said:
"I can remember in this House frequent occasions on which the conduct of the Northern Lights Commissioners has been brought before the House and overhauled by it; but I am bound to say that a more disgraceful exhibition than that presented by these accounts I have never heard in the course of my membership. The Irish Board is admittedly even worse than the Scotch ... The administration of the Irish Board is a disgrace to the United Kingdom".-[Official Report, Commons, 17/3/1898; col. 171.]
In the same debate, Mr J Bryce, MP for Aberdeen, South, reserved his criticisms for the Commissioners of Irish Lights. He said:
Little has changed in 100 years because, 85 years after independence for the Republic, the UK Government in effect control and fund the Irish lights, and no shipping interests that provide funding have any say in how that funding is spent.
More recently, other noble Lords and I have been raising this issue in this House for six or seven years. When my noble friend Lady Crawley was the Minister responsible for this, I tabled a Question asking why the British Government had not made more progress in their negotiations with the Irish Government. Her reply was, "They're not very keen to negotiate". My response was, "Well, they wouldn't be, would they?".
On 10 June, the Shipping Minister, my honourable friend Paul Clark MP, announced that for 2009-10, with effect from 1 July this year, UK light dues would rise by 11 per cent for all ships and 43 per cent for ferries and short sea operators. The increase in light dues in 2010-11 is pretty horrifying. For a typical 4,000 TEU container vessel on the North Atlantic trade routes making 10 trips to the US and back a year, the increase works out at 80 per cent. The proposal to increase light dues in this way, apart from being the highest for two decades, is unacceptable given the current economic downturn and the very serious financial trouble that the shipping industry is in. The shipping industry tries to reduce its costs all the time and remain competitive, and there is a real threat that many companies will try as much as possible to avoid calling at UK ports and to divert ships to the continent or elsewhere, which will have a serious effect on our economy in the long term.
The key issue is that the increases are being proposed to make good a £20 million forecast deficit in the general lighthouse fund, but the bulk of the deficit would be removed if the Republic of Ireland was asked to meet the full cost of the provision of its aids to navigation, which is about £15 million. If the Government of Ireland took responsibility for financing the maintenance of lights around their coast, the increase in light dues to ships coming into UK ports would be virtually zero.
More than five years ago, in January 2004, Alistair Darling, who was then the Secretary of State for Transport, committed the Government in their response to the Transport Committee's report on ports to stop this subsidy to the Republic. This was reinforced on 26 March this year when the Parliamentary Under-Secretary of State acknowledged his department's failure to deliver and made it his personal and departmental obligation to find a solution. Sadly, that personal obligation disappeared three months later in a reshuffle. Interestingly, my noble friend Lord Adonis, who is now the Secretary of State for Transport, confirmed in a Written Answer on 12 January that there was no legal obligation on the UK to fund the maintenance of Irish Lights. Indeed, a good precedent can be found in
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I am not suggesting that navigation aids are not vital to shipping. Of course they are, and no one would want to see any problem about that. But I believe that the subsidy from the British Government to the Irish Government should cease and the Irish Government should be responsible for the maintenance of their own lights, just like the French, German, Dutch and all other Governments. I was in Dublin last week and I talked to a number of port operators and shipping line representatives. I mentioned the issue of the subsidy of Irish Lights and the general response was, "We've had it good for 85 years, so why should we stop now?", and they were rubbing their hands. I have some sympathy with that.
The Government recently commissioned yet more studies to consider efficiency, management and so on from the general lighthouse authorities, but the fact remains that a cut in what I call the Irish subsidy would mean that efficiency could be looked at taking a bit more time and with a bit more vigour than has been the case up to now. The increase is a disaster for UK shipping and it is unnecessary. I would also say that it is anti-competitive in that ships going into Irish ports pay lower dues because of the subsidy they gain from ships coming into UK ports.
In conclusion, when my noble friend responds, can he give me an assurance that at the end of this financial year the subsidy for Irish Lights will be finished completely? It is quite possible to do and it would make all the shipping lines happy. They could then turn to the important things in life-ensuring that everything is done in the most cost-effective way so that they can deliver what their customers want. I beg to move.
Lord Dykes: My Lords, I thank the noble Lord, Lord Berkeley, for initiating this debate on a Motion of regret. I listened carefully to his words and I wish to intervene only briefly to support him. This is a most extraordinary state of affairs. As the noble Lord explained, it is a unique situation where a solemn promise was first given some years ago by Alistair Darling that this would be put right, and then subsequently by the Parliamentary Under-Secretary of State. I am glad that the noble Lord not only has a reputation as an expert on transport matters in general, particularly rail and rail freight, but also because he will frequently have a go at following things up. It is easy for Members of this House to be beset by too many matters and therefore to let things lie when there is no response. But this is a glaring anomaly and surely it must be put right. The Minister has an opportunity to begin to do so by making a few putative announcements of a change in these financial arrangements.
I have not had time to do a 100 per cent, thorough research into this, but my own trawl-if that is the appropriate word in this context-of other EU member states with coastal areas shows that no other EU
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None the less, despite that, Ireland is a prosperous country on any measurements. I am sure that, despite the fact that the Government in Dublin are being attacked severely for their budget deficit, which everyone says is too high, they will find what are modest resources in comparison with other demands on the Irish national exchequer and pay that which they owe. It is, as I say, a modest amount, and yet it would save the United Kingdom Exchequer much in terms of the various urgent necessities to put this matter right and to return to a zero deficit if at all possible. It is therefore very important for the Minister to respond properly to this brief debate and put the matter right.
Lord Geddes: My Lords, before my noble friend Lord Glentoran comes steaming in from the opposite direction, which I am sure he is about to do, I support the noble Lord, Lord Berkeley, most strongly. I, too, have raised this question in this House on more than one occasion-by dint of an Oral Question, I seem to recall, on the last occasion. Other than for historic reasons-which are now long gone, as the noble Lord, Lord Berkeley, said-there is no rationale whatever to continue to support the Irish Lights for shipping coming into the United Kingdom; it simply does not make any sense. I hope the Minister will not say, as his predecessors have, "We will try to persuade the Irish to come round to our way of thinking". That time has long since gone.
Lord Glentoran: My Lords, the noble Lord, Lord Geddes, is clearly so worried about what I am about to say that he wanted to jump in first.
I was interested in the rather distorted and imaginative comments of the noble Lord, Lord Berkeley. I know that he has been chasing Ireland for a small amount of money for a very long time, but an integrated collection system for light dues is in place in which revenue collected from shipping goes to the central fund, irrespective of the country in which the vessel actually pays its light dues. That is an important issue. It is a user pays system and no Government are going to pay; so, no pay by the user, no lights.
I should point out to my noble friend that no funding is provided by the British Exchequer but, importantly, the Irish Government do pay an agreed
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However, only so many dynamic economies can be made without compromising safety standards. Three years ago, the GLAs warned the shipping Minister that by 2009 the DfT would need to sanction a rise in the levy as revenues could no longer match the necessary costs in providing navigation safety-and this is all about safety. In January, the DfT warned the shipping industry that light dues would need to rise in the region of 24 per cent to meet the real cost of navigation safety. There has been a predictable outcry from ship owners-we have heard it from the noble Lord, Lord Berkeley-who have threatened to alter their trading patterns to avoid the new charges, and from port operators, who would feel the effect of such a move.
The GLAs dispute these claims as light dues are a minor element of costs-1 per cent to 15 per cent depending on size and frequency after this rise. In total costs, it represents one penny in every £100 of any goods imported into this country by sea. Gosh, it is a big, big deal, is it not? The role of the GLAs is to provide such aids to navigation as the volume of traffic justifies and the degree of risk requires and, in so doing, discharge the UK and Irish Governments' obligation for aids to navigation provision under the SOLAS convention. The aids to navigation provided include lighthouses, light vessels, buoys and beacons including an AIS-automatic identification system-as an aid to navigation, together with an integrated differential GPS service. In total, the GLAs provide some 1,200 aids to navigation and inspect more than 12,000 of them.
Some light due payers have called for the amalgamation of the GLAs, implying that bureaucratic overmanning and duplication are in place and that amalgamation would make significant savings. It would not. The major savings have largely already been realised, but it would generate considerable additional cost with a very long payback period. The GLAs cover 20,000 miles of coast, covering some of the most complex waters in the world. This demands local knowledge and experience.
All GLA activities are focusing on one common goal: the maintenance of marine safety as cost-effectively as possible. Everything from ship management to stock purchase is co-ordinated between the three services to meet this goal. A report on inter-GLA co-operation efficiencies is reviewed and accepted by the ship owners annually. Where appropriate, functions are combined. There would be significant costs to setting up a single GLA or separate UK and Ireland GLAs, particularly in relation to pensions, redundancy, relocation, retraining and new infrastructure. Those costs are estimated to be between £25 million and £70 million, or 12.5p to 35p on light dues, which I am sure the ship owners
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The GLAs co-operate closely to minimise overlap in the provision of aids to navigation and to ensure that there is a consistent level of service. The tried GLA model is based on giving the mariner a seamless and integrated safety service around the British Isles, ensuring that all the coastline dangers are covered. This integrated service brings significant cost and efficiency benefits. Light dues are raised at ports, thus Trinity House raises 87 per cent of all revenue because of the large ports in the UK area, but the revenue must go towards supporting NLB and CIL in protecting the less frequented areas of Scotland. Ship owners can choose, if they call into various ports, which port they wish to pay their dues in.
A complaint by some elements within the shipping industry is that light dues raised in England support Ireland-we have heard this from the noble Lord, Lord Berkeley-to the amount of £16 million, out of a budget of £90 million. They say that this is a subsidy from their dues to a foreign country and that cutting that subsidy would solve the funding gap, as we have heard from the noble Lord, which is also rubbish. There is an international agreement between the UK and Irish Governments that the Irish Government make a direct exchequer contribution into the GLF amounting to a proportion of CIL costs incurred in the Republic. This contribution from the Republic of Ireland and the light dues collected at Irish ports comprises about 50 per cent of the costs in Ireland.
The Government, together with the Irish Minister for Transport, have indicated their commitment to consider this further-I have been involved with this-and discussions are ongoing between the respective Ministers. Many vessels use the aids to navigation in Ireland but actually pay their light dues in the UK. This was always the case and it is a firm argument for an integrated system. The position of the GLAs is that the size of the Irish contribution is a matter for the UK and Irish Governments while the GLAs focus on their statutory duty to protect the safety of the mariner.
In a recent announcement, the respective Ministers for Transport in the UK and Ireland have indicated that an overall assessment of the provision of the integrated aids-to-navigation service to all regions of the UK and Ireland will be carried out and it is understood that terms of reference for this review are being written. Light due charges are raised by a formula that includes tonnage, voyage frequency and a flat rate. The statutory instrument raises all three elements.
The shipping industry has made misleading claims to defend its position. The DfT commissioned an independent report to review the claims which concluded that the impact of the light dues increase was negligible. Light dues were between 1 per cent and 11 per cent of total port charges, rising to between 1 per cent and 15 per cent after the light dues increases were taken into account.
Generally, stevedoring and port and tug costs are 90 to 95 per cent of the costs of calling at a UK port. Trans-shipment costs far outweigh the light dues increase. Dropping UK calls is not a viable economic option for shipping companies. Light dues remain a very small proportion of shipping costs, so the increase in them will not affect shipping calls to the United Kingdom. This increase has to be seen in the context of consistent and significant reductions over 16 years.
The General Lighthouse Fund is also a quasi-pension fund-pensions raise their head again-as payments to existing GLA pensioners, of whom there are some 2,000-are made directly from that source under a pay-as-you-go arrangement. They are therefore reliant solely on the General Lighthouse Fund for the payment of their ongoing pensions.
Current GLF reserves include an amount of £44 million, which represents the value of pension contributions made by GLA employees-in other words, it belongs to them-as determined by the fund's actuaries. It is therefore essential that the level of the reserve fund is not diminished to fund the GLAs' day-to-day operations. The Department for Transport and the GLAs have legislation in place, which is awaiting parliamentary time, to change the arrangement to a fully funded scheme. The pension reserve is an important element in the requirement for increased income for the GLF. A General Lighthouse Fund minimum level has been agreed, and now is the time to increase light dues to ensure that it is not breached.
The method of paying for navigational safety around the British Isles is based on a "user pays" system. Consequent to safe navigation is protection of the marine environment. The GLAs fully support the department's proposal to change the charging regime to recover the cost of the provision of our services to the maritime community. The GLAs operate an integrated safety service that is vital to mariners around the coasts of the UK and Ireland. Sufficient funds and stable financial arrangements are required to ensure that it can be delivered to the required international standards.
Before I sit down, I declare my interest-I thank my noble friend Lady Wilcox for reminding me-as having been an unpaid commissioner for the Irish Lighthouse Service for 22 years.
Lord Greenway: Follow that, my Lords. The noble Lord, Lord Glentoran, has covered the whole matter from the GLAs' point of view in great detail. Like him, I must declare an interest as a non-pecuniary Elder Brother of Trinity House.
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