APPENDIX 1: MERCHANT SHIPPING (LIGHT DUES)
(AMENDMENT) REGULATIONS 2009 (SI 2009/1371)
Letter from Lord Berkeley
I write to ask your Committee to urgently
examine the merits of statutory instrument No. 1371 and request
the special attention of the House for further debate. The issue
of light dues has been a matter of interest and concern to me
for some time, particularly the continuing funding by the UK Government
(through light dues paid by ships entering UK harbours) for the
maintenance of lights in the waters of the Irish Republic. I strongly
support the shipping industry view that this dramatic increase
in light dues, whilst of historical interest, is deeply flawed
and is an issue on which the Government has consistently failed
to tackle the underlining problems to deliver a lasting solution.
On the 23 February 2009 the Department
of Transport (DfT) went out to consultation on the following amendments
to the light dues regulations by increasing rates for merchant
vessels calling at ports in the UK and Ireland, by:
- elevating the current rate of
£0.35p per nrt (net registered ton) to £0.41 p per nrt
- lifting the cap on the maximum
chargeable tonnage from 35,000 to 50,000nrt
- escalating the maximum annual
number of chargeable voyages from the current seven to nine.
This set of substantial rises - between
17 to 115 per cent - was met with unanimous, industry-wide condemnation.
Some of the extensive national, regional and trade media coverage
is enclosed in Annex 1 [not printed].
Light dues are a tax on shipping entering
UK ports, which are used to fund lighthouses, beacons and other
navigational aids in UK and Republic of Ireland waters administered
by the three General Lighthouse Authorities (GLA). These taxes
are not applied in most other EU member states. Where they are
applied, the costs are significantly lower than those currently
charged by the GLA.
The proposal to increase light dues
was the highest in two decades and, given the current economic
downturn, I believe that this is simply unacceptable. Shipping
companies are continuously analysing all aspects of their operations
to reduce costs in an ever competitive international market. With
this backdrop, there is a very real threat vessels will start
omitting UK ports in favour of more cost effective continental
alternatives. Diversion of UK calling vessels would be extremely
damaging to the British economy - impacting on the ports, wider
transportation sectors and peripheral support industries - and
the environment in both the short and long-term.
The increases were proposed in order
to re-distribute the £20M forecast deficit on the General
Lighthouse Fund (GLF) - a fund from which pensions contributions
and the GLAs are funded. This deficit is largely due to the poor
performance of investments and the revaluation of the euro, but
this masks three key problems, which DfT refuses to tackle.
1. The bulk of the GLF shortfall
would be removed at once if the Republic of Ireland was asked
to meet the full costs of provision of the aids to navigation
in Irish waters - some £16M. In January 2004, DfT made a
pledge in a response to a House of Commons Transport Select Committee
enquiry to cease the outdated subsidy. This was reinforced on
26 March 2009 when the then Parliamentary Under Secretary of State
Jim Fitzpatrick MP acknowledged his Department's failure to deliver
and made it both his personal and a departmental obligation to
find a solution.
2. The second point which was
completely lacking from the consultation was an analysis of the
GLAs' cost-base and structures. I believe that there is genuine
scope for rationalising the GLAs' support structures to eradicate
heavy duplication, for example, in HR and fleet management. The
GLAs need to reflect today's testing commercial reality and exercise
the sort of fiscal discipline that shipping companies are applying
- typically cutting costs by between 10-25 per cent. The GLAs'
gross shore-based over-manning to support six small ships is unsustainable
and DtT has failed to tackle this issue - with no clear proposals
and timeline for urgent rationalisation to release the obvious
and substantial financial savings locked in the three organisations.
3. The third point covers the
GLAs' budgetary assumptions which appear to bear no relation to
commercial reality. Across Government, all agencies (including
those involved with safety such as the Highways Agency) are being
asked to make five per cent year-on-year budgetary cuts. The GLAs'
budgetary assumptions, four per cent uplift year-on-year, is out
of line, unsustainable and against cross-governmental policy.
It is also unnecessary as I have demonstrated above.
In spite of overwhelming condemnation,
on 8 June 2009 DfT published SI No 1371, to come into force on
1 July 2009, which made the following amendments to the consultation
paper:
- after 30 June 2009 and before
1 April 2010, to increase dues from £0.35 to £0.39p
per ton subject to a maximum charge of £13,650 per voyage
- on and after 1st April 2010, a
further increase to £0.43p per ton subject to a maximum charge
of £17,200 per voyage
- escalating the maximum annual
number of chargeable voyages from the current seven to nine.
DfT has completely ignored industry
concerns and, disappointingly, the amendments ratchet up light
dues on all ships by 11 per cent and by 43 per cent on ferry and
short-sea operators. The situation is further exacerbated by a
second increase, which goes further than the original proposals,
in 2010/11. Some of the shipping industry and wider supply chain
reaction is catalogued in Annex 1 [not printed].
It is clear that light dues create
a competitive disadvantage and, combined with the proactive efforts
of north European ports offering incentives for business, this
increase in the tax only heightens the need for decisive action
in line with the Government's efforts in other sectors like the
car industry. The amount of disproportionate damage caused by
these proposed increases is striking, both to Britain's maritime
reputation and to the confidence in the country's employment and
fiscal environment.
I sincerely hope your Committee will
see the merits and the need for further debate on this issue.
June 2009
Information from the Department for Transport
FUNDING OF IRISH LIGHTS
The provision of aids to navigation
around the British Isles is funded by light dues levied on shipping
using ports in the United Kingdom and Ireland, but the Irish Government
also makes a direct contribution in recognition of the shortfall
in revenues collected at Irish ports compared with UK ports. The
current agreement is that the contribution from Irish sources
(i.e. light dues collected at Irish ports plus a contribution
from the Irish Government) is 50% of the assessed costs of providing
the lighthouse service in the Republic. Negotiations with the
Irish Government to improve the basis for funding Irish Lights
have been taking place and an evidence report in 2008 by the Department
for Transport's In-House Consultancy has been accepted by both
Governments as a basis for further work.
Jim Fitzpatrick recently drew attention
to progress in the negotiations during a Westminster Hall adjournment
debate on 2 June 2009. He said,
"I recently met the Irish Minster
of Transport in Dublin to discuss the matter. I am pleased to
say that we agreed a better formula for apportioning Irish costs
on a north-south basis.
"We also agreed on the need for
an overall assessment of the provision of the integrated aids-to-navigation
service to all regions of the UK and Ireland. An evaluation is
to be undertaken to consider all aspects of delivery, including
continuing increases in efficiency, potential structural improvements
and the overall financing arrangements. We now have the basis
for making real progress. We will make every effort to reach an
agreement that is more soundly based than the old one and one
that ensures a fair apportionment of funding. The Irish negotiations
also raised the question of whether the present GLA structure
was the best.
"We have an agreement with the
Irish Government, and we need to negotiate a way forward from
that. We cannot simply say to the Irish that we no longer accept
the arrangements. The discussions in Dublin nearly two weeks ago
resulted in a commitment to a ratio of 85:15 in payments [in respect
of the apportionment between the Republic of Ireland and Northern
Ireland] for this year; and we have a commitment to consider the
50:50 payments [split between Irish sources and the General Lighthouse
Fund] in the longer term.
"As I said, the Irish negotiations
also raised the question of whether the present GLA structure
is the best solution. There are good historical reasons for the
position that we now find ourselves in, and we must protect the
undoubted advantages that stem from the expertise and geographical
knowledge to be found in each of the GLAs, a point made by a number
of colleagues. However, I believe that we need to take a fundamental
look at how the lighthouse service is provided, and that view
is shared by the Irish Minister. Without Irish co-operation, implementing
change will be more difficult. I do not intend to destroy the
good service that we have, but we need to consider, in the 21st
century, how it can be improved in order to achieve efficiencies
that will deliver a better service."
Work is now in progress to carry out
the assessment and evaluation of the lighthouse service as agreed
by the Ministers.
June 2009
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