HC Deb 21 October 1986 vol 102 cc1135-42

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

4.1 am

Sir Julian Ridsdale (Harwich)

I regard this as one of the most important Adjournment debates that I have initiated. I am trying to protect local jobs and the jobs of British seafarers in an area which has the highest rate of unemployment in East Anglia and the second highest rate in south-east England. According to the June 1986 Manpower Services Commission report, unemployment in my constituency averages 15.8 per cent. In Harwich it is nearly 14 per cent.

In my plea for the maintenance of a Harwich-based train ferry I have the support of management and the unions for a united rescue operation which will give the seafarers the chance to prove that Harwich is still the right place for these train ferries. In the view of the management of Sealink, that is an economically viable proposition, and that is why I am supporting it.

However, it is a backs-to-the-wall operation for us in Harwich, for we make our case against the background that a commercial buyer, Sea Containers, paid far too high a price for Sealink, the company for which the seafarers work. Sea Containers paid £66 million and I am told that the next offer was in single figures.

At the time of the sale in July 1984 the former Secretary of State for Transport said that the Sealink workers would join a progressive and expanding group with the substantial resources necessary to make a real success of this important enterprise."—[Official Report, 18 July 1984; Vol. 64, c 313.] Alas, Sea Containers has had a very bad year because of the depressed state of world shipping. Therefore, it will not be able to subsidise Sealink through some of its present troubles unless everyone realises that this is a backs-to-the-wall operation. As a consequence, badly needed investment to replace long years of neglect by British Rail will not be forthcoming as quickly as Sea Containers would have wished, not only because of the bad year that Sea Containers has had but because the Channel tunnel go-ahead this year has made borrowing for shipping and ferry interests on our east coast far more difficult.

It is a strange coincidence that I should be given this debate on Trafalgar day as I try to protect seafarers' jobs against French subsidised competition. Indeed, we seem to face a deal between two state monopolies which will mean at least 100 seafarers losing their jobs which will, in the end, go to French seamen because the French state railways have subsidised the building of a giant new ferry.

This is neither fair competition nor a fair market place. British Rail, in conjunction with the French state railways, is eliminating competition ahead of the building of the Channel fixed link when it will have a monopoly over prices. That is why I think that this act by British Rail in forcing the ferries to move from Harwich should be referred to the Monopolies and Mergers Commission. The Government should ensure that no move is made until that has been done and a report received from the commission on British Rail's intentions and on the consequences of the move.

Apart from the action that I hope the Government will take, I shall explain why we in Harwich believe that it is an economically viable proposition to keep the Cambridge ferry operating from Harwich. If that is accepted, it makes the case for referring to the commission British Rail's action over forcing the move of the train ferries.

Our reasons are simple. The train ferry terminal at Harwich has been properly maintained and can continue in use for many more years. It can also cope with significantly larger vessels at a modest price. The marshalling yard at Harwich can cope with additional traffic. Its main arrival and departure sidings have been electrified as part of the total electrification of the railway to Harwich. This has been paid for by the EEC.

Rail services between Harwich and the midlands and the north of England can be routed to avoid London. Continuation at Harwich will avoid heavy redundancy costs for between 185 and 195 British seafarers and shore staff. Surely it is a waste of national economic resources to construct a train ferry terminal and marshalling yard at Dover or Ramsgate, especially with the Channel tunnel in prospect, when perfectly good facilities exist in Harwich.

The big sell has been the apparent long-term economic advantages of concentrating the Harwich services in Dover as the vessels can make more round voyages in a 24-hour period. This requires a brand new terminal at Dover which is estimated to cost between £8 million and £10 million. This gives rise to problems of justification and financing in light of the Channel tunnel project. There is every probability that British seafarers from Harwich who took part in the Falklands campaign will have their jobs taken by the French because their Government have subsidised the train ferry to replace the Harwich ferries.

Our Merchant Navy is now being reduced to a level that could not sustain support to our armed forces for a Falklands-scale operation, let alone our commitment to NATO. Let us not forget that it takes 13 years to produce a master mariner. We must pay much more attention to what is happening in our merchant shipping fleet. It is a serious subject for another debate.

Is it wise for more and more of our continental trade to be routed by French ports when 40 per cent. of our continental trade is with Germany and trade with eastern Europe and the USSR is likely to increase much more in future?

Is it not better to have a choice of two British terminals rather than one in the event of breakdowns or strikes? It is very rare in recent times for both the Harwich and Dover terminals to be blocked at the same time. The customers who own or use train ferry wagons prefer the choice of two British terminals.

I am a strong supporter of privatisation, particularly since I have seen how badly Harwich has fared under British Rail compared with Felixstowe, but we are now in an exceptional situation. Surely, in view of what has happened to Sea Containers, and bearing in mind that we are not competing on a level playingfield because of subsidies paid by the French, the Government should examine the situation again.

Over a month ago I wrote to the Prime Minister and spoke to the Secretary of State for Transport and told them that privatisation was on trial over what was happening about the Sealink operations. I was also in touch with the Financial Secretary to the Treasury, who has responsibility for privatisation, because I was so disturbed by what was happening and about the difficult financial situation of Sea Containers.

When Sealink was sold for £66 million, it was not a knock-down price as was suggested by the Leader of the Opposition. As it turned out, it was far too high a price. It could be said that Sea Containers was shabbily treated by the Government and British Rail by their undeclared commitment, at that time, to the Channel tunnel and by BR's declared policy to move the train ferries to Dover. Surely it would have been better business, knowing the need for investment, to have warned Sea Containers that the price was too high. As it is, the serious position has put at risk the jobs of seafarers in Harwich and made investment doubly difficult, especially after the Channel tunnel announcement.

I hope that the Government will refer the action by British Rail, enforcing the move of train ferries to Dover, to the Monopolies and Mergers Commission and persuade British Rail to renegotiate Sealink's plan to keep the Cambridge ferry at Harwich, at least for the time being, while the commission is considering the proposed move.

We are in a new position, caused by the difficulties of Sea Containers. The least that we can do is to help its subsidiary, Sealink—which is on its own—and press for a renegotiation to determine the new price that it can offer British Rail to keep the Cambridge ferry at Harwich. Indeed, if the Government cannot help, I hope that British Rail will pay attention to what I have said and at least bridge the gap that is so serious for the seafarers.

As Member of Parliament for the seafarers in Harwich, since the move was threatened at the beginning of August I have tried to persuade British Rail to support keeping the Cambridge ferry in Harwich, at least until the position becomes a great deal clearer. I must tell the Government that no satisfactory figures have been given to me, even in confidence. British Rail, to put it mildly, has a mysterious way of accounting. No figures seem to be available, even over a five-year period. Yet in 1985 traffic levels were considerably up. It is no wonder that the seafarers are desperate.

I am sure that we have to make privatisation to be seen to succeed, and until it does we have an obligation to the seafarers affected by the current position. I have reached the conclusion that British Rail's intention is to break the back of our ferry operation in Harwich, so that eventually they will have a complete monopoly with French state railways. The move to Dover of the Cambridge ferry is a temporary expedient until the French ferry is built. That is why BR will not negotiate a reasonable price for Sealink to keep the Cambridge ferry in Harwich. They fear that Sealink will eventually build up a viable, competitive ferry service and show up the complete failure of British Rail to invest in our ports or modern ships over the past 20 years.

Indeed, in the recent negotiations between British Rail and Sealink, Sealink made an offer to which BR never responded. In my view, these are not commerical decisions — they are very suitable arrangements, or, to put it more unkindly, they are fixes between two state monopolies. That is why I think that it is the Government's duty to report British Rail's action to the Monopolies and Mergers Commission. It is the only way that we can be fair to ourselves, the seafarers, our country and the British merchant shipping fleet, which is dwindling every day — and many of us take very seriously the plight that it is in.

4.14 am
The Minister of State, Department of Transport (Mr. David Mitchell)

Despite it being 4.14 am, my hon. Friend the Member for Harwich (Sir J. Ridsdale) has stated robustly the case on behalf of his constituents, expressed his concern to protect jobs and sought my intervention. It might be helpful if I begin by explaining the relationship between Government and British Rail because this is central to the difficult position in which my hon. Friend places me.

It is essential for the efficient management of the British Rail business that there should be a clear definition of the responsibilities which belong to Government and those which belong to railways. It is essential also that the railway management is given the freedom to get on and run its railway without constant political interference. That is why we gave the British Rail chairman a clear and comprehensive set of objectives in October 1983, and why my right hon. Friend the Secretary of State announced new objectives for the chairman to the House earlier today. Both the 1983 objectives and those announced today endorse the policy of successive Governments for many years that British Rail's freight business should act as a commercial business. It has been made clear also that we expect the freight sector to provide an adequate return on capital in the same way as any other business.

I must tell my hon. Friend that it would be wrong if British Rail were to give subsidies to its freight sector, so enabling it to compete artificially and unfairly with its private sector road competitors. It is right that British Rail should receive no subsidy for freight operations. It can meet its target only by succeeding in the market place, which means meeting customers' requirements at prices that they are prepared to pay, and that is against very tough competition at present.

Sir Julian Ridsdale

Would my hon. Friend agree that there are difficult circumstances when the French Government are really giving subsidies for the building of a French ferry?

Mr. Mitchell

I take my hon. Friend's point and I shall address it shortly.

I believe that it is right that British Rail should operate its freight sector on a commercial basis, competing for the traffic for which it is best suited. We believe that the interests of the transport user are best served by the maximum competition, and competition is ultimately in the best interests of the transport industries themselves. Nobody likes the immediate effects of the difficult decisions which have to be taken, but that does not mean that those decisions can or should be ducked. The surest way to ongoing decline is to fail to adapt quickly to changing markets.

For a number of years there have been two train ferry services to the continent in the context of the debate, one from Harwich to Zeebrugge and the other from Dover to Dunkirk. The shipping services involved at Harwich were operated by British Rail's subsidiary, Sealink. When Sealink was sold in 1984 to Mr. James Sherwood's group, Sea Containers, BR entered into a contract with Sealink for the continued operation of the service.

Unfortunately, the train ferry business has been losing heavily for several years. The number of rail wagons carried on ships specially designed for that purpose has dropped from 114,000 in 1970 to only 66,000 in 1984, and the train ferry activity in 1984 incurred substantial losses. Revenue failed even to meet shipping costs alone by £4 million per annum, and made no contribution towards direct rail costs. That scale of losses is pretty shattering. No business can operate profitably if it has to carry the overheads of a much larger volume of traffic than is now available. The operation is split into two separate activities and it is fundamentally uneconomic. The ships are too small and too slow to be cost-effective on the run from Harwich to Zeebrugge and the distance is more than twice that from Dover to Dunkirk. The two ships operating out of Harwich are able to achieve only one round trip a day each. At Dover, three ships of the same size can achieve eight round trips between them. The same volume carried in those eight round trips could be achieved in two round trips by a larger, faster vessel.

British Rail has, therefore, decided that the only way in which it can make the train ferry business pay is by using larger, faster ships on a short sea crossing. This will enable the trains to share the available space with roll-on/roll-off traffic, and the higher speed and shorter sea crossing will allow the ships to make a larger number of round trips each day thus reducing overall costs to something approaching £5 million a year. British Rail's decision was taken only after protracted negotiations in which Sealink reduced the price it was offering at Harwich, but that was not sufficient to make continued operations viable. British Rail's decision means that, from January, it will stop operating out of Harwich.

I turn to my hon. Friend's point about an alleged offer by Sealink which was not replied to by British Rail. My understanding is that in a telephone conversation it was made clear that that offer was no longer extant. In any case, it would not have been sufficient to change the decision.

British Rail tells us that its employees involved at Harwich will be offered redundancy terms or alternative employment on other BR services. I understand that there will be some redundancies among the merchant seaman involved, although I believe that some of them at least will be offered employment within Sealink. I very much regret the need for job losses, but from the evidence available it appears that BR has no realistic alternative. If it is to face up to competition in international freight transport, it has to find ways of reducing its costs. The whole future of train ferry operations is very much in the balance and there are clearly a number of difficult decisions facing BR. However, they are decisions that BR must take on the basis of its own commercial interests. It is only by this means that the long-term security of trade and jobs will be preserved. To do anything other than that would he nothing short of commercial suicide.

I understand my hon. Friend's concern, but I think that his suggestion that BR's decision should be referred to the Monopolies and Mergers Commission is misguided. British Rail has no monopoly of freight services, internally or to the continent, and it will have no monopoly of freight services through the Channel tunnel. Freight is an extremely competitive business. That is why British Rail must retrench and rationalise to remain in this type of business. There is no way that it has a monopoly in this field.

Despite the financial and commercial arguments, my hon. Friend has left me in no doubt that the decision is hotly contested in Harwich, and that rumours are going around which imply that BR's motives were other than purely commercial ones. I should like to deal with some of those questions.

My hon. Friend claimed that privatisation is on trial. As I have pointed out, the proportion of rail freight is declining, and one of the two routes concerned had to go. It is geography and the economics of operation which dictate which of the two routes goes. The economics of operation are not likely to be substantially affected by any change of ownership. A change of ownership cannot possibly affect geography. The length of the crossing to Zeebrugge is the main reason why the Harwich service cannot be operated as economically as the Kent service. The decision would have been the same whoever owned Sealink.

Sir Julian Ridsdale

The Minister has referred to figures showing a decline in freight rates. My figures show that between 1984 and 1985 they went up by between 10 and 15 per cent. That is why I challenge some of the figures that British Rail has given the Minister.

Mr. Mitchell

If the figure has gone up by between 10 and 15 per cent., that represents a drop in the ocean of what is needed to make the operation viable. What is the wonder of the matter is that British Rail has continued to operate a service at a massive loss for so long. It is not that it has now reached the point at which it is rationalising one service across the continent. For a long time it has split its operations in two and has lost money on both of them. We must take that on board.

My hon. Friend raised the quesion of the subsidy for the French ship. I know that certain fears exist. It is suggested that the French SNCF vessel which BR plans to use instead of the two older, smaller Sealink vessels is unfairly subsidised. The information we have been able to obtain leads us to believe that no operating subsidies are available to that ship; nor do we have any evidence that it has received shipbuilding subsidies beyond those permitted within the EEC and which would have applied had it been built by BR in this country.

My hon. Friend suggested that the loss of the two ferries might have defence implications and affect the United Kingdom's ability to respond in an international emergency. Those ferries would be used in time of emergency not as rail carriers hut for heavy vehicles. However, neither is ideal for that purpose. Any loss of vessels for defence purposes is undesirable but at present we are not short of vessels suitable for the roles that these two Sealink ships might play in an emergency.

Sir Julian Ridsdale

I am concerned not about the loss of the two vessels but about the loss of seafarers' jobs. I underline that it takes 13 years to train a master mariner properly. Because we shall lose seafarers' jobs in this case, we are in danger of putting our defence interests at risk.

Mr. Mitchell

I shall draw my hon. Friend's point to the attention of my right hon. Friend the Secretary of State. I accept the validity of his point about the length of time it takes to train seamen, but I do not think that, in the context of the massive losses which BR is suffering on the Harwich to Zeebrugge route, it would be proper to burden BR with a non-commercial remit to train seafarers. There must be other ways to approach that problem.

My hon. Friend expressed his worries on electrification. Most of the electrification project is unaffected by the Harwich decision, but some expenditure on wiring of the sidings at Harwich has been rendered nugatory. That is unfortunate, but circumstances have changed since the original decision was made. British Rail will be trying to ensure that such waste does not recur. I should add that the EEC transport infrastructure grant was not paid for the train ferry electrification work. I am happy to relieve my hon. Friend's mind on one point: the transport infrastructure grant which the European Commission is paying towards electrification is purely for passenger services and is not affected by withdrawal of the train ferry service. My hon. Friend said that the operation to which he referred was a viable business proposition. I think that I have been able to explain that it is not. It has been losing so much money that it could not possibly continue.

I should like to end on a more optimistic note. United Kingdom passenger and freight traffic have been expanding for a long time. Prospects are for continued growth. Freight traffic generally through the port of Harwich has increased from 2.15 million tonnes in 1970 to 3.75 million tonnes in 1984. As my hon. Friend is aware, Sealink Harbours Ltd. has plans for further expansion of its facilities at Parkeston quay and is seeking powers from Parliament to enable it to undertake the necessary development. I am well aware that BR's decision is a blow to my hon. Friend and his constituents, but I hope that he and they will appreciate that in the circumstances which I have described BR had no real alternative and Harwich still has a bright future in other activities.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Four o'clock am.