HC Deb 19 March 1982 vol 20 cc662-8

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Goodlad.]

2.31 pm
Sir Julian Ridsdale (Harwich)

I welcome the timing of this debate, because of the curtailment of the Sealink services at Harwich. Although I shall deal with the immediate problems affecting the port, shipping services and jobs, one of my chief purposes in initiating the debate is to hear from my hon. Friend the Minister his views about the future of Sealink, against the background of the current problems at Harwich. I particularly hope to hear his views about the timing of privatisation, because the matter is closely connected with investment, on which jobs and the port's future prosperity ultimately depend.

This is the most sensitive debate that I have initiated in my time in the House, because men's jobs are at risk, and naturally the seafarers are very anxious. It is an added difficulty that the debate is taking place against the background of the reorganisation of British Rail shipping services and the establishment of Sealink, and obviously at a time when we are moving towards privatisation.

Any time of reorganisation is difficult, because the reorganisation would not take place unless there was a need for it. Anyone who has had close dealings with the shipping services at Harwich knows that this reorganisation is overdue. We know in Harwich that under British Rail not nearly enough investment took place, especially when we see the progress that is being made on the Felixstowe side of the harbour and the large investment taking place there.

We welcome this reorganisation, because we have every confidence that sooner rather than later private investors and others will see the enormous potential in Harwich, and new investment will come. This is the only way in which we can secure jobs and prosperity for the future.

In my view, the reason why jobs are at risk is that old and uneconomic ships cannot sustain the rates of pay, overheads and manning levels that more modern ships could sustain. It is this difficult problem that Sealink management must deal with. I only hope that this debate, which I have been pressed to initiate at the request of the seafarers, will contribute to solving the difficult short-term problems and the threat to employment which the seafarers face.

I am not on the side of management or of the seafarers. I associate myself with all those who wish to see Harwich a prosperous, competitive port. In spite of the present recession, I am sure that the long-term prospects for Harwich are excellent.

I believe that I should underline the reasons for my confidence in the future of Harwich as a port. We have just had the report of the Harwich conservancy board, showing that the number of ships entering Harwich harbour in 1981 reached record levels. The indications are that there will be a continued but more modest growth in 1982. There was an overall increase of 7 per cent. in 1980. The Haven ports are quickly catching up on Southampton and Liverpool to be one of the major port complexes in the country.

The Danish shipping line, DFDS, which operates out of Harwich, has announced profits of £10 million in 1981, an increase of £3.86 million on the previous year. The net profit after tax is £6.96 million for the year compared with £6.32 million in 1980. We must compare that with the forecast substantial trading loss in 1982 for Sealink's passenger car and freight services if no changes are made. I trust that the cuts will not continue in the long term once investment comes, as I am confident it will with privatisation.

Another reason for my confidence in the future of Harwich is the Bathside development that the Government have approved. I hope that the necessary investment will come soon. If Felixstowe can succeed, I see no reason why Harwich cannot do the same, given the same conditions for private investment.

I have reports that at both Parkeston Quay and Zeebrugge too many holding sidings are full of traffic waiting for the ferries. On 4 March 1982 a report by the Railway Development Society stated that there is irrefutable evidence that traffic is increasing in spite of the recession.

Harwich is a natural port for the growing trade with Germany, which, as the recession fades, will lead to a more balanced trade. There is bound to be a demand for increased rail traffic. Private investment is bound to lead to the advantages of modern jumbo ferries. Modernisation of rail terminals is also essential.

We note that Government money has been made available to Felixstowe for such a project. Under what conditions would such investment from the Government be available in Harwich?

I shall deal with the current problems. On 4 January this year Sealink (UK) told seafarers at Harwich of plans to implement severe restrictions in the train ferry services from Harwich to Zeebrugge and to close altogether the Harwich-Dunkerque ferry service. Sealink also annonced that it wanted to reduce the crews of the two passenger ships which operate from Harwich to the Hook of Holland prior to replacing them by a chartered ship. If all those proposals go ahead, it is claimed that nearly 380 seafareres would lose their jobs this year. That would almost halve the number of Sealink seafaring staff at Harwich and Parkeston Quay.

A three-month consultation period is coming to an end. Sealink has agreed that services will remain at their previous levels. The consultation period ends in the middle of April. Therefore, I welcome the opportunity to discuss some of the problems as the Government are responsible for making Sealink independent of British Rail as a first step towards privatisation

Two ships currently operate on the Harwich-Zeebrugge route—the "Speedlink Vanguard" and the "Cambridge" ferry. Under Sealink's original proposals, the route would have been operated by a single ship—the "Speedlink Vanguard". The "Cambridge" ferry would have been laid up with a skeleton crew to be available at 72 hours' notice to replace the "Speedlink Vanguard" in case of breakdown.

Working on a six-day programme with an 85 per cent. load factor, the "Speedlink Vanguard" would have been able to carry 552,240 tonnes net per year. That was against the forecast for the route in 1982 of 520,000 tonnes net. In theory, provided that there were no mechanical breakdowns during the year—which the seafarers thought extremely unlikely—the "Speedlink Vanguard" would have been able to cope with the train ferry traffic on offer.

The seafarers claimed that the "Speedlink Vanguard" could not carry dangerous goods and that management was putting at risk the reliability of the service upon which its future growth and their jobs depended. I am glad to say that on 25 February the seafarers were advised that provisional agreement had been reached for a six-month experimental period of operation of the "Cambridge" ferry, subject to a satisfactory negotiation of economic crewing arrangements with the seafarers' trade unions on the basis of a single crew for both officers and ratings. I hope that the negotiations over manning which are still going on will soon be resolved by the management and seafarers.

The Harwich-Dunkerque service is operated daily by the "Essex" ferry, which is now 25 years old. Dangerous goods can be carried, and it is a service for which it will be difficult to find an alternative. Because of the age of the ship, mechanical breakdowns have affected the reliability of the service, but seafarers claim that 51,700 tonnes were carried in 1981—an increase of 13 per cent. over the previous year.

The seafarers estimate that if the route is closed, the charge per load would increase by as much as £15 or £20 per tonne, and dangerous goods would have to go by road. It would be helpful if the Minister would clarify the Government's policies in that respect. Surely we should do all that we can to encourage rail transport for as many dangerous goods as possible.

With that in view, I am attracted by the seafarers' plan, now that the "Cambridge" ferry is to be retained in service on a reduced schedule—four days a week—to operate her on an alternative day basis from Harwich to Zeebrugge and Harwich to Dunkerque. The seafarers claim that by operating in that way, the "Cambridge" ferry would be capable of carrying about 7,400 wagons per annum compared with the 4,000 carried last year on the Harwich-Dunkerque route.

The seafarers claim that that would provide a reliable service and meet the requirements of users. I hope that there will be discussions between the seafarers and the management about that suggestion, particularly as the alternative to using the Harwich-Dunkerque route would mean dangerous goods travelling by road and trade going to foreign seamen in this difficult time of unemployment.

Seafarers claim that if the proposals for the "Cambridge" ferry to use the Harwich-Dunkerque route were adopted, the Harwich train ferry service would make an annual profit of £1 million. The scheme accepts, of course, the loss of the "Essex" ferry service.

Sealink intends to reduce costs on the Hook route by reducing the crewing of the "St. George" and "St. Edmund" and to replace the two ships, possibly later in the year, by one large ship. Seafarers are concerned that supplementary capacity would have to be provided if Sealink is to continue carrying trade cars, which are such important factors on the revenue side and on which jobs are dependent. I hope that the matter will be raised in discussions between the management and the seafarers.

Sealink has informed me that it intends to run two British ships this summer, although one big passenger ship is a possibility later this year. There will be no reduction in shipping capacity offered to the public, but it is hoped to agree a reduction in crew numbers from the present 484 to 400.

Seafarers claim that they have had to bear the brunt of the present reorganisation, but Sealink informs me that in 1980 and 1981 it had a 10 per cent. cut in staff in London and other offices, and further reductions are planned for 1982.

The reorganisation has been carried out to ensure that we in Harwich have a competitive service for the future. If we cannot secure that, not only the seafarers, but all those dependent on the port for trade and business in Harwich will be affected.

I hope that the management and seafarers will cooperate to get the operation back on a sound financial basis. Unless reorganisation takes place, Harwich will be unable to attract the private finance that is essential for a return to profitability. Although the problems are difficult in the short term, and I know that many jobs are at stake, Harwich must have good long-term prospects.

Sealink is to be privatised and that will permit an injection of fresh capital into a business which has had a dismal investment record over the past 25 years. With the Government's privatisation proposals under way, the company will no longer be able to look to the Government for subsidy. It will have to make its own profits and compete successfully with other operators.

I sincerely hope that we shall see good co-operation between management and seafarers, which can only be good for all the people of Harwich and this country. I trust that the cuts in seafarers' jobs will not be as severe as was at first feared.

2.44 pm
The Under-Secretary of State for Trade (Mr. Reginald Eyre)

I am grateful to my hon. Friend the Member for Harwich (Sir J. Ridsdale) for raising this important topic this afternoon. I compliment him on the balanced and informed way in which he has presented the difficult issues surrounding the future of ferry services at Harwich. I fully appreciate my hon. Friend's concern on these important changes, which will unfortunately, as he said, produce some loss of employment in the Harwich area.

The Government are, of course, well aware of the controversy, both within Sealink and the Harwich area generally, that the changes announced by British Rail on 4 January have generated. My hon. Friend has written to us about them and we have received letters from several other hon. Members. We have also received two petitions collected locally in the Harwich area, one of which my hon. Friend forwarded to my right hon. Friend the Secretary of State for Transport. Therefore, we are in no doubt about the strength of feeling on the issue.

I welcome the opportunity of explaining to the House the general background to the changes proposed by British Rail and the Government's position on them. I should stress, however, that my role must necessarily be confined principally to explaining why the two businesses concerned, British Rail Freight and Sealink (UK) Ltd. decided to make the changes to their Harwich services. The changes are commercial ones that the businesses themselves decided upon after most careful consideration of the facts. They have not been imposed by the Government.

Successive Governments—both Conservative and Labour—have required Sealink and the railway freight business to operate commercially. This has meant that they have to compete with the private sector operators on an equal footing without subsidies from the Government. Therefore, in the interests of maintaining the viability of the businesses for which they are responsible, the managers have to react to changing market conditions in the same way as do their private sector counterparts.

It would be totally counter-productive for hon. Members and outside groups to urge public enterprises of this sort to act against their own commercial judgment. This is the sure route to a loss of morale within the businesses and to mounting financial deficits, which ultimately would threaten the livelihoods of all those employed within them. We have, unfortunately, seen that happen elsewhere in the public sector. It is something that all of us who want these British Rail businesses to succeed would wish to see avoided. Therefore, I hope that the House will view the particular problems at Harwich in that context.

My hon. Friend has explained that there are two basic issues at Harwich—the train ferry services and the multi-purpose Harwich to Hook of Holland service. I shall try to reply to as many of his questions as I can in the time available. If there is anything outstanding, I shall he glad to write to him about it.

First, I shall deal with the train ferries. Sealink (UK) Ltd. currently operates four train ferries from Harwich—the "Speedlink Vanguard", and the "Cambridge", the "Essex" and "Norfolk", on two routes, Harwich to Zeebrugge and Harwich to Dunkirk. My hon. Friend referred to those.

Unlike most of Sealink's other services, the train ferries are paid for by British Rail's freight business. Therefore, the freight business is ultimately responsible for deciding what level of service will be provided. On train ferries, Sealink is very much in an agency role.

The freight business had hoped to build up the service to a point where investment in new jumbo ferries would be possible. These would be much larger than existing ships and would offer a better and more efficient service. The Government, for their part, fully supported that idea and gave approval to the project, subject to the important proviso—which merely reflects inevitable economic reality—that the investment should be made on an economically viable basis.

The board had already chartered the "Speedlink Vanguard" so that it could begin to build up traffic to a level that would require the much larger jumbo ferries. I am told that, in terms of traffic levels, the board was well on the way to achieving that objective. But what has gone wrong is that the revenue that the service is generating in the highly competitive environment it faces from roll-on/ roll-off road traffic is unfortunately insufficient to make it a paying proposition.

On the present arrangements for sharing revenue with the European railways, the prospect of a jumbo feny service that can achieve viability has, regrettably, slipped away.

Once it had reluctantly reached this conclusion about prospects for jumbo ferries, the management then had to decide what to do about the existing train ferry services. It clearly could not allow the existing losses to continue unabated.

It concluded that the only course open to it was to withdraw service to Dunkirk—which is of course also served from the BR system by the Dover-Dunkirk ferry—and to sell the two oldest ferries—the "Essex" and the "Norfolk". It proposes to continue the Harwich to Zeebrugge route with the "Speedlink Vanguard", while keeping the "Cambridge" as a back-up ship. To my knowledge, that remains at present the board's position although it is continuing to hold discussions with the trade unions concerned on the details.

Before I go to the specific points raised by my hon. Friend, I should perhaps deal quickly with the other important issue; the changes proposed to the Harwich to Hook of Holland passenger ferry service. Unlike the train ferries, this is a matter purely for Sealink and does not involve the BR freight business. In an effort to recover economic viability on this service, Sealink is seeking to establish new manning arrangements for both officers and crew on the existing ships—the "St. Edmund" and the "St. George".

There is also a possibility of a bigger, more efficient ship being introduced on to the route to replace the two older and smaller ships. As yet, that is only a possibility. It is not possible today to go into all the detailed arguments for these changes; they are commercial decisions that have been arrived at by Sealink's managers only after very careful analysis of all the factors.

Substantial losses have been incurred on the route and Sealink, which has to compete here as elsewhere against a number of highly efficient companies, cannot be expected to sustain losses of this order without taking the corrective action that is vital if it is to maintain its market share, and secure the long-term prospects of its undertaking.

My hon. Friend also asked for my views on the longterm prospects for Harwich and Parkeston Quay. I am sure that my hon. Friend will understand that Governments cannot guarantee the long-term future of a port. Our policy is that ports should compete freely with one another and their success in the market should determine which ports flourish and which decline. To some extent their fate will depend upon much wider economic, geographic and technological changes which we may not be able to predict today.

One thing I do know is that Harwich and Parkeston Quay will not benefit in the long term if the Railways Board tries to pursue projects against the weight of economic evidence. The losses would soon mount up, and, sooner or later, it would have to call a halt. The disruption for the port at that time would be far greater than the proposals before us now. Wishful thinking is not enough. The board needs to adjust its services now so that they become profitable, with any future expansion producing a real return. Expansion of that sort would be sustainable and would provide long-term benefits for the port.

It can be seen that I do not think that we should be pessimistic about Harwich's long-term prospects. I was pleased to hear the optimistic terms that my hon. Friend used when he looked to the future of the port. The port has done well in the past and it has benefited, as have all the haven ports, from the general movement of traffic to ports in the South of England.

Despite the public sector financial constraints, Sealink has invested substantially in passenger and freight facilities in Harwich in recent years—about £5 million since 1980 Over the next four years Sealink plans to spend £6 million at Harwich on improvements to berths and ramps, £2 million on improvements to passenger and freight facilities and over £1 million on major repairs and renewals. While Sealink remains in the public sector, the investment plans are subject to the competing investment needs within British Rail. Once Sealink is transferred to the private sector, those constraints will be removed.

My hon. Friend asked me particularly about the long-term prospects for Sealink. As he knows, the Government and the board have an agreed policy to transfer Sealink to the private sector at the earliest suitable opportunity. I regret that I cannot be more precise this afternoon. One of the main reasons for doing that is to enable Sealink to escape public sector financial constraints. Once in the private sector, the company can tap private funds to carry out the investment that it needs if it is to compete effectively with other ferry operators. The Sealink business plan involves substantial investments over the next few years, and these would undoubtedly be very difficult for the Railways Board to accommodate within the constraints of its overall external financing limits, bearing in mind the other competing claims for railway investment.

Sealink would therefore benefit greatly from the changeover to private sector status, and the prospects for the company, its ports and its workers would be much improved. That is why privatisation is fully supported by the management of Sealink.

As far as train ferries are concerned, privatisation as such is unlikely to have an immediate effect one way or the other. The Railways Board would probably choose to continue the present contractual arrangement between Sealink and the freight business, although it would of course be free to consider other arrangements in the longer term if it wished.

My hon. Friend mentioned the section 8 grants. As he knows, those are a means of contributing to the provision of rail facilities. In the case of Harwich, of course, there has been a full range of rail-connected facilities for many years, so section 8 grants would not be of benefit there. But, as I said earlier, there has been substantial investment at Harwich in other facilities in recent years and there are plans for further investment in the future.

The carriage of dangerous goods across the Channel is governed by international agreements as well as by United Kingdom domestic regulations. Those ensure that these goods are carried safely by whatever mode. Naturally we want to see as much freight as possible going by rail where it is economic for it to do so.

In the short time available to me I have tried to outline the enhanced prospects that I believe would be of benefit to Harwich if Sealink is brought to privatisation and if investment can be carried out. Those factors will help in the future, about which my hon. Friend is greatly concerned.

Question put and agreed to.

Adjourned accordingly at three minutes to Three o'clock.