§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Patnick.]
§ 10.1 pm
§ Mr. David Shaw (Dover)I have spoken in a number of debates on the British shipping industry, and I am particularly pleased to be able to address the House tonight again on that issue which is of considerable importance to my constituency of Dover and to Deal.
Dover has a long history as a port and my constituents have a strong interest in our local and national shipping industry. Currently, Dover's port and ferries provide employment for about 7,000 people, of whom 70 per cent. are residents of Kent. Many live in Dover and Deal and in the adjoining area. A number of seafarers also live in my constituency and work on British ships which sail from other ports in the United Kingdom. The House will be aware that our local ferry industry in Dover has been a tremendous success story, with ever-increasing numbers of passengers and freight tonnage carried between this country and the continent.
However, the current position of our national shipping industry causes my constituents considerable concern. The importance of our shipping industry must surely not be in question. It is important for trade. Our nation has lived by its skills at trade for many centuries. Our balance of payments surplus from shipping is currently about £2.5 billion, with gross earnings of £4 billion. It has also been estimated that that balance of payments surplus could be considerably increased; many in the shipping industry believe that it could be increased to £10 billion over a period with increased investment in British ships.
Our shipping industry is also important for defence. We have seen two wars since the Government have been in office—the Falklands and the Gulf wars. The British merchant marine had important roles to play in both wars in supporting our forces.
We also expect that, in future, if our forces are required to go into action again—of course we all hope not, but from a practical point of view we must be ready for the worst—mobile forces will probably be required, and out-of-area forces in particular. In the circumstances, we must be aware that the British merchant marine will have an even more important role in supporting our forces than perhaps it had in the past. Our shipping industry is also important for the transport of passengers as well as goods. We, especially we in Dover, must recognise that not all goods can go through the channel tunnel when it eventually opens. Therefore, our shipping industry, in particular the port and ferry industry in Dover, is vital to the national interest.
§ Mr. Roy Beggs (Antrim, East)The hon. Member for Dover (Mr. Shaw) will appreciate that my constituents in Lame depend very much on ferry services between Lame and Stranraer, and they are equally concerned at the reduction in the British fleet. Does the hon. Gentleman agree that something must be done urgently so that we can introduce more young people into shipping and ensure that they have proper training right through to officer level?
§ Mr. ShawI agree with the hon. Gentleman. It is a vital industry for the nation and for his constituency as well. The industry needs to recruit a considerable number of 538 young people to make sure that we have sufficient officers and ratings in future. It is through large numbers of young people joining the industry that we will make sure that Britain is again a leading seafaring nation, with modern ships and well-trained young people crewing them. The hon. Gentleman shares my concern about the decline in the number of ships and tonnage. We should consider the reasons for that decline.
It is certainly wrong for some hon. Members to say that the Government are responsible for the decline in the British merchant marine. The decline started well before the Government came to office. The start of the 1970s saw the beginning of the decline in the British merchant marine. The reasons for that are not only that Britain's share of world trade was declining but factors beyond our control, such as decisions made in the United Nations, supported by British Governments and by many other Governments.
Those decisions affected the extent of cross-trading. In consequence, developing countries ensured that their own shipping fleets had an increased share of world trade and trade from their shores. The United Nations Conference on Trade and Development code on shipping brought into being a group which resulted in many developing countries trying to obtain 40:40:20 ratios for trade, whereby 40 per cent. was reserved for the developing countries and only 20 per cent. was to be allocated to cross-traders. Of course, Britain has expanded its merchant marine over many centuries, based on cross-trading.
Also, during the 1970s the Soviet and communist nations expanded their merchant marines with considerable subsidies, and built unprofitable ships which would not succeed in any market-oriented economy. In consequence, our shipping fleet faced considerable competition.
The British merchant marine was also not helped by the United Kingdom economy in the 1970s. The economy did not go through a very good phase. There was a lack of economic growth and, therefore, a lack of growth in trade, which did not help our merchant marine.
The then Labour Government took desperate measures to build subsidised ships. We had the curious situation that several ships were built in British shipyards only to be sold under subsidy to Poland and used by the communist regime in Poland to undercut British ships in the markets in which our ships operated. All that, combined with convenience flagging and some ships built under subsidised tax regimes in overseas countries, meant that our merchant marine had a difficult 1970s. It is no wonder that the decline has continued.
It is also worth noting that the 1970s was a bad decade not only because there was a significant decline in the merchant marine but because, in the 1970s, British Governments did not address safety problems as they should have been addressed. Therefore, it is particularly pleasing that, in their Merchant Shipping Act 1988, the present Government introduced safety measures which have pleased all my constituents who work on our ferries in Dover. Indeed, in Britain our ships are now much safer than many foreign ships which call at our ports. I hope that my hon. Friend the Minister will address that issue in his reply.
The decline in our ships in Great Britain has also led to the problem referrred to by the hon. Member for Antrim, East (Mr. Beggs). There is a reduced number of ratings and the number of people entering the industry in recent 539 years has not been at a level that will sustain a satisfactory number of officers and ratings for the decade to come. I am pleased that the recruitment of officers has recently stabilised, but I urge the Government carefully to consider employment in our shipping industry and to come up with policies that facilitate training and improve the numbers of people who enter our industry in the years ahead.
One should also draw attention to the many measures taken by the Government which have been helpful to the shipping industry. The economic growth that we have seen in the 1980s has resulted in considerably improved standards of living in Britain. In consequence, our industry has expanded in terms not only of exports but of imports. To the shipping industry, both exports and imports are of particular importance.
Economic growth has brought more trade which at least has meant that the decline in our shipping industry has been less sharp than it might have been. Of particular interest to Dover has been the shift in the Government's policies from direct to indirect taxation and lower rates of income tax. Lower rates of income tax have led to increased use of Dover ferries. After every reduction in income tax, there has been a considerable expansion in the number of passengers travelling on Dover ferries.
I am also pleased to draw attention to the fact that the present Government have helped seafarers in the taxation of their overseas earnings. Section 45 of the Finance Act 1991 is particularly welcome to seafarers because it gives them better relief in certain circumstances against taxation of their overseas earnings. The new safety measures to which I referred earlier have increased the public's confidence in our ferries and our shipping industry. By increasing public confidence, we ensure that more use is made of the ferries between Dover and the continent.
However, I should also mention one measure that has not been helpful. It is the Treasury's idea of fiscal neutrality. The Treasury has been too theoretical in its approach to capital allowances. Perhaps the computer model that it uses does not sufficiently consider the risk factors involved in investing in British industry, especially the shipping industry. If risk factors were taken into account in the Treasury model, the cash flow cost of a ship would be considered more carefully in relation to the risk that the shipowner had to bear. The cash flow cost of a ship is borne up front, yet the tax relief is spread over many years—far too many. The tax relief needs to be reconciled more closely with the cash flow cost on day one.
Our shipping industry is even facing problems from our European Community partners. Evidence is emerging that some EC countries are abusing the principle of a level playing field and giving considerable benefits to their shipowners and seafarers. Those countries are encouraging their shipping industries unfairly when compared with the British shipping industry. Some EC countries, and some European countries outside the EC, have been giving some form of subsidy, through reliefs on payroll taxes and on the equivalent of our national insurance.
The Department of Transport should carefully monitor what those countries are doing and should set up a monitoring system in close co-operation with the General 540 Council of British Shipping and employees' representatives so that we can ensure that British shipping is not unfairly prejudiced by the actions of other EC member states.
The Government should also consider other measures to support our shipping industry. We must have more investment in the industry, and we must remember that investment is determined by profitability and cash flow. A careful examination must take place to ensure that the industry is profitable and has a positive cash flow. That is how we can ensure that more jobs are created in the industry. A return to economic growth in this country is clearly crucial. We must ensure that that growth results in considerable investment in shipping.
We must take firm action against convenience flagging. We should not allow ships to be flagged under foreign registers, and we should try to bring many ships back on to the United Kingdom register. We should also prevent ships from being flagged coley for tax reasons in overseas registers. We should not hesitate to use safety regulations to prevent subsidised and unsafe foreign-flag ships from using our ports.
Also, we should encourage the Treasury to adopt the tax measures that I mentioned earlier, and to introduce a more favourable capital allowance regime. I strongly support a 25 per cent. straight line write-off, which would ensure that British ships had a tax write-off over four years. That would reconcile the need for cash flow and tax allowances to be more closely aligned.
I would also support an examination of the question whether it would be appropriate for the employer's national insurance contribution to be restricted in the same way as the employee's contribution. The employer's rate of national insurance should not continue at the same rate after the employee's contribution levels off.
Those measures are small in total cost, but they are important and should be considered. If they cannot be considered in time for the Budget next Tuesday, they should remain on the agenda for early action if the Treasury finds that the economy and Exchequer finances allow early action to be taken.
§ The Minister for Shipping (Mr. Patrick McLoughlin)I congratulate my hon. Friend the Member for Dover (Mr. Shaw) on securing an Adjournment debate on this important subject. Those of us who know my hon. Friend are aware that he has taken considerable interest in this subject during his time in the House and that, on many occasions, he has lobbied Ministers about it.
I shall do my best to respond to the points raised by my hon. Friend. However, he is aware that my right hon. Friend the Chancellor of the Exchequer will make a statement next week and it is not for us to try to anticipate what may form part of that statement. A number of my hon. Friend's suggestions relate to fiscal matters, but obviously they are matters for my right hon. Friend the Chancellor.
As the Minister with responsibility for shipping, I can say that the Government fully recognise the important contribution that is made to our country by the British merchant fleet and by the men and women who serve within it. On the one hand, that fleet provides an economic 541 contribution to the country from trade and invisible earnings and, on the other, it can be called upon to play an important strategic role in our national defence.
Given the constituency of my hon. Friend, it is not surprising that he dealt at length with the role of the ferry companies. I am tremendously impressed at the way in which those companies have improved their services. Nowadays, travelling on a ferry is like going on a mini-cruise. That bodes well for the future of the ferry industry, which will face competition problems.
My hon. Friend said that we are especially reliant on shipping as an island nation, and that is well known to us. We are reliant on it not only for trade, but for the carriage of passengers, particularly to the continent. There is no doubt that the channel tunnel will offer strong competition to the ferry operators. It remains to be seen how they will adjust to that competition, but it is clear that the major operators are already planning for the future with newer, larger ships and by offering improved facilities both on board and on shore. There is no doubt that the traveller —the consumer—has already reaped the benefit of that competition.
We should be proud of the status that we hold in the maritime world. If one looks beyond the headline figures of United Kingdom registered tonnage, it is obvious that Britain is still a key player in the shipping industry. In total, British individuals and companies have an ownership or management interest in ships totalling some 41 million deadweight tonnes—or six per cent. of total world tonnage. In addition, the City is home to many international shipowners as well as an important centre of maritime insurance. I doubt that that would continue to be so under any other than a Conservative Government. It is important to remember that when considering our future as a maritime nation and the future of our maritime industry.
The headquarters of the International Maritime Organisation is located in London. It now has 136 states as members. The IMO is a highly respected international body, responsible for maritime regulation. The siting of the IMO in London demonstrates Britain's continuing high standing within the maritime world. The IMO has made great progress in creating safer and cleaner shipping lanes throughout the world to the benefit of ship owners, seafarers, manufacturers, consumers and the environment.
I am proud to say that the United Kingdom has taken a leading role in those initiatives and has been prepared, where necessary, to take a very firm stand against the less rigorous attitudes which certain IMO members are sometimes tempted to adopt. We are, for example, currently and forcefully arguing against the suggestion that some countries may wish to dilute the provisional agreement, secured last year, to phase in new stability regulations for existing roll on/roll off passenger ferries. Those new regulations arise, of course, from the investigations carried out into the Herald of Free Enterprise disaster. To ignore the results of those investigations would be to show a completely unacceptable disregard for the safety of ferry passengers.
My hon. Friend should note that we cannot rule out the possibility of taking unilateral action on this front if satisfactory agreement cannot be reached at the IMO. I hope that that goes some way towards convincing my hon. Friend of the seriousness with which the Government take the whole issue of safety. We would not want to do anything that discriminated against British flagged vessels, 542 so we would be looking at all vessels operating in British ports. The Government do not underestimate the importance of the shipping industry.
We appreciate that the size of the fleet has declined in the recent past. As my hon. Friend suggests, there are many reasons for the decline. Changing trading patterns, the emergence of new shipping powers, and the development of new, more sophisticated technology have all played a part. Nor is the United Kingdom alone in having been affected by those changes. Since 1981, the European Community as a whole has seen a decline of about 50 per cent. in gross registered tonnage.
At the same time, the industry is still recovering from the worldwide slump which prevailed for most of the last decade. That was a time of falling freight rates and over-capacity, partly caused by the subsidies which were poured into shipbuilding and encouraged investment in uneconomic tonnage, as my hon. Friend ably pointed out. Conditions have now improved, but fierce competition has led to major rationalisation in the industry. A number of companies have diversified into more profitable areas and some shipowners have left the industry completely.
Competition remains fierce, but a joint Government-industry working party which reported in late 1990 concluded that the British shipping industry was "now lean and fit" and prepared to meet the challenges of the coming years.
I have spent some time putting the position of the merchant fleet in context. I do not apologise for that. When people speak about the declining British fleet, it is too often forgotten that the British shipping industry remains vigorous and forward-looking,
It is essential that that message is stressed time and again, for we shall not get people to go into the industry if we hear nothing but doom and gloom and prophecies about things going wrong. A more forward-looking attitude, with a more confident case being put across, is welcomed by the industry. We are not complacent. We recognise that the continued decline of the United Kingdom register must have wider ramifications, and we have taken a number of positive steps to try to reverse that trend.
I mentioned earlier the joint working party which met in 1990. Its task was to examine the current state of the industry and to identify ways in which the competitiveness of British shipping could be improved. It reported its findings in September 1990, making five major recommendations which we and the industry are pursuing.
Good progress has been made. We have already introduced simplified procedures for the type approval of ships equipment. We have also consulted widely on officer nationality, and I hope to come forward with regulations very shortly.
On cabotage, the House will know that we have fought long and hard in the EC to bring about the liberalisation of coastal trade. We will continue to press the case, and we hope that it can be resolved during the current Portuguese presidency. If not, I assure my hon. Friend that, when the United Kingdom assumes the presidency later this year, the subject will be very high indeed on our agenda. It has been on the agenda for far too long. It is time it was off the agenda and agreement reached.
Other recommendations need primary legislation to amend the Merchant Shipping Acts. It is our firm intention to come forward with legislation at the earliest suitable opportunity.
543 Action on training is mainly for the industry. A training task force has been created to identify future manpower needs and to ensure that those needs are met. At the same time, the Government continue to offer financial assistance with the costs of training officer cadets and providing experienced officers with higher qualifications. The scheme has been extremely successful, increasing annual cadet recruitment from a serious low of 162 in 1987—I accept the point that my hon. Friend made about that—to more than 500 at the end of the last academic year.
The joint working party looked primarily at the economic aspects of the shipping industry. I briefly alluded to the defence role of the merchant fleet. That is a vital area which we have not overlooked. We all know what a vital role was played by our merchant ships at the time of the Falklands crisis, and I cannot pay too high a tribute to the skills and courage of the British seafarers who manned those ships.
It is understandable that concern should be expressed about the size of the fleet having declined since then. Hon. Members can, however, be assured that we monitor the fleet's capability to support our armed forces in times of crisis. My right hon. Friend the Financial Secretary announced that we were undertaking a thorough review of the subject. This has been a complex task, not least because of dramatic political changes that have occurred internationally. I assure my hon. Friend, however, that the subject is being given the full and careful consideration that it deserves.
Another subject that my hon. Friend raised was the growth of the so-called "flags of convenience". Those registers can and do offer an easy way out for shipowners who are, in some cases, prepared to compromise on safety matters in order to cope with increasing costs and competition. There is little doubt that the safety records of those vessels cannot compare with those on the United Kingdom register, and the matter is of considerable concern.
We have publicly condemned the low standards which some registers are content to apply and have called for 544 action to address the problem. For example, the more rigorous use of port state control would go a long way towards improving the safety record of the international shipping industry, particularly if it were combined with effective sanctions. Port state control has already been used to good effect in the United Kingdom. We are the only nation that consistently exceeds the agreed target figure of inspecting 25 per cent. of foreign vessels visiting our ports. In 1990, we inspected 34.4 per cent., and we have set ourselves an internal target of not less than 30 per cent. a year. I look forward to that record continuing.
It has also been suggested that we should refuse access to British ports to vessels that do not meet the same standards as our own. Such an idea may seem radical and clearly needs further thought. However, although we fully support the importance of maintaining a liberal shipping policy, we consider that freedom of access to national waters must be backed by compliance with proper safety standards, and we are committed to ensuring that that principle is given practical effect.
I realise that many countries offer wide subsidies to support their national shipping industries. But it is clear that such policies have the negative effect of distorting the market and of encouraging investment in unprofitable areas. We have seen evidence of that in the 1970s and 1980s, when investment grants led to overtonnage and many of the problems from which the industry is only just emerging today.
Instead of matching subsidy with subsidy, we should prefer to see such distortions removed so that companies can compete on equal economic grounds. My hon. Friend should be assured that we are continuing to press through the appropriate bodies—the EC and OECD—for the removal of subsidies and unfair aids to shipping.
I give my hon. Friend an undertaking that we shall look carefully at monitoring the points that he asks us to monitor, and I shall write to him in the near future.
§ The motion having been made at Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at twenty-nine minutes to Eleven o'clock.