§ 5.25 p.m.
§ Lord Underhill rose to move, That this House takes note of the regulations (S.I. 1987 No. 244), laid before the House on 27th February.
§ The noble Lord said: My Lords, I am sorry to detain your Lordships on the last day before the Easter Recess, but this is an important debate and I am very grateful to those other noble Lords who have put their names down to speak.
§ As noble Lords will be aware it had been my intention to move a prayer to annul the regulations, but for some reason that has been found to be impossible as we have run out of time. I must explain that that is not due to any error on my part or on the part of my noble friend the Chief Whip. Eventually, when I was told that we had run out of time, it seemed that there was only one course to take as it would be wrong to rise for the Recess without having a debate on these regulations which deal with the increase in light dues.
§ The only possibility was to move a Motion to take note of the regulations. I make it quite clear that in moving a Motion to take note I do not accept the principle in the regulations. On the contrary, I found myself in agreement with the comments made only yesterday by the chairman of the British Ports Association at a function at which the Minister was the principal and distinguished guest. The chairman described the increases as illogical, irresponsible and indefensible.
§ The regulations relate to the superintendence and management of our coastal lighthouses, buoys and beacons. In that connection there are three general lighthouse authorities: Trinity House, the Northern Lighthouse Board and the Commissioners of Irish Lights. The costs of those three authorities are met by the general lighthouse fund for which the Secretary of State has statutory responsibility. There will be many who know more about these matters than I do. So far so good. However, neither the Secretary of State nor the Department of Transport meets the actual costs. The total annual expenditure is some £60 million, £46 million of which is funded by dues levied on merchant ships calling at UK ports. The balance is met from reserves in the general lighthouse fund, which as I have said is held by the Government but which has been built up by light dues paid over a period of years.
§ The Government have argued that because of the drain on the fund, there must be a 13.85 per cent. increase in light dues and that is the purpose of the regulations. Why do we wish to meet the cost of navigation lights in this way? That is the first important question. All European countries except Sweden, Greece and Ireland meet the cost of lighthouses and other navigational aids out of general taxation, not by a tax on port users. Why should the United Kingdom be the exception? With seven of the EC states treating this as a national charge, it surely is 1206 a matter for harmonisation and a directive from the Community.
§ It may be an issue that should be taken up with the Council of Transport Ministers. I hope that the Government will seriously consider at a not too distant date transferring these costs to national taxation. Why must the United Kingdom be different from most other European countries? In support of this principle we have the British Ports Association, the General Council of British Shipping and Trinity House. They all support the view that this should be a national charge and not a charge on port use.
§ In addition we now have the fact that the general lighthouse fund will also meet the costs of the Racal Decca Navigation System, the order for which was debated in your Lordships' House in January, if my memory serves me correctly. Again I am told that only Britain and Denmark do not fund the costs of this system from general taxation. There is also a lights advisory committee which is representative of shipowners, port authorities, chambers of commerce and underwriters.
§ Incidentally, I should like to ask why the representatives of nearly 2,500 staff in the three authorities to which I referred are not also represented on the lights advisory committee? Those are the men who actually carry out the operations for which the three authorities are responsible. However, the lights advisory committee, which advises the Department of Transport on lighthouse matters, challenges the Government's view of the finances and the increases. That is the body which advises the Government on these matters.
§ The unanimous view of the lights advisory committee was that the increases were not justified. It was also the view of the committee that the level of dues should be frozen for at least a further year pending the important studies now taking place on navigational aids and possible reorganisation.
§ I should like to say in passing that only the day before yesterday two members of staff of a lighthouse travelled a long distance to see me and to put their points on the studies which are taking place. They endorsed the view that that was a good reason for light dues standing frozen at present. They also put forward the point that there is excellent monitoring of all the automation programmes now taking place. They expressed the view that there are a number of imperfections in the automation programme which ought to be considered. That is one reason why I hope that the men who are doing the job will be consulted about these matters in addition to the other bodies.
In an oral Answer in another place on 23rd February, Mr. Michael Spicer, the Under-Secretary of State, said that light dues impose no direct costs on the port industry. He is perfectly correct in saying "no direct costs". The Secretary of State, in a Written Answer on 4th February, (at col. 663 of Commons Hansard) concluded:
I much regret the need for this increase, and I recognise that will be unwelcome to shipowners and the ports' industry".
§ The General Council of British Shipping has pointed out that the increases could mean that for a light container ship calling at a British port the light dues could work out at about £40 for each container. The British Ports Association estimates that light dues add 1207 no less than £20,000 to the cost of each ship entering United Kingdom ports. As a result of the payment of light dues, a ship calling at a UK port will pay twice the cost of handling a container at Rotterdam and more than three times the cost at Hamburg. This hits the consumer. It hits the shipowner first of all, but eventually it must affect the consumer. Such costs must dissuade shipping companies from coming into UK ports.
§ In March 1986 the Department of Transport conducted a study into differentials in freight rates between the United Kingdom and north-west Continental ports. This study found that on average a seventh of the difference in freight rates was because of light dues. To make matters worse, Ministers have announced—I think the noble Lord, Lord Brabazon, himself has echoed this statement—that there is to be another regulation to extend the liability for light dues to larger fishing vessels which the Secretary of State has said comprise about 40 per cent. of the United Kingdom's fishing fleet. The annual charge which it is proposed to put into this new regulation will be £200, plus £320 for each metre in excess of 10 metres. The intention, I understand, is that this is to apply to vessels of all nationalities, but obviously it will be a further serious imposition of costs on 40 per cent. of our hard-pressed shipping fleet. Yet no mention is made of any charges likely to be imposed on similar size pleasure craft.
§ If the purpose of the regulations is to recover costs why is there no suggestion of any contribution from the Royal Navy, which has great use of the navigational aids? On that point, previously the Royal Navy paid some £800,000 per annum, so I understand, to Decca for the navigation system. It will no longer pay that as it has been transferred to the general national fund.
§ The main objective for having this debate is to complain and protest against the level of increases in light dues, which I hope the Government will seriously reconsider. Better still, I hope the Government will give very serious consideration to following practically all the other European countries by transferring the costs of light dues altogether to national taxation. That would greatly help the competitive position of our British ports.
§ However, if the Government are determined to remain blinkered on this issue of transferring light dues to the national charge, I hope they will consider the other suggestions which have been made, particularly the principle that all users should make a contribution to the light dues, if the Government insist that light dues shall still be paid by shipowners. This is an issue of great importance to British shippers, British ports and British-owned ships which frequently use United Kingdom ports. On that basis, I beg to move the Motion standing in my name.
§ Moved, That this House takes note of the regulations (S.I. 1987 No. 244), laid before the House on 27th February.—(Lord Underhill).
§ 5.38 p.m.
§ Lord Layton
My Lords, I should like to thank the noble Lord, Lord Underhill, very much indeed for 1208 raising this issue. It is only right that I should declare my interest in the whole subject in that I am president of the British Shippers Council. We the shippers have been concerned with the port charges and light dues to a very great extent over a very long time, with little help from the Government to solve the problem. In this respect I agree with the noble Lord, Lord Underhill, on the idea that we should ask the Government to look closely at alternative methods of providing a system of payment and that it should be withdrawn from being an effective barrier to trade, which is what it is at the moment.
In the study done by the Department of Transport in 1986, we found out that our combined port charges amounted to 60 per cent. more than the port charges in our competitor ports overseas. This additional cost burden falls on both British and foreign vessels and may in turn be passed on by them to shippers (as I know to my cost) in the form of increased costs on both exports and imports.
In turn, shipowners, both UK and foreign, are likely to take this charge into account when considering the revising of sailing schedules and ports of call. That has the inevitable result that more vessels will call at Continental ports in preference to those of the United Kingdom. Apart from the obvious damage this does by causing a lack of business in the port industry, the consequent diminution in competition has another very important effect. It means that as fewer ships come into British ports there is less competition among them, and up go the freight rates.
The result is that the freight rates from British ports to overseas long distance are higher than the freight rates from the Continental ports. For this reason, friends of mine busily put their materials into a container and ship them across the Channel on a ferry or send them over on a coastal vessel in order to ship them out of ports like Antwerp with a lower long-distance freight rate.
That is one of the impacts, and it is a double-barrelled one; but there is another which is very important. It increases costs generally to manufacturing industries which are importers of material. If I take my old company—here I come back not only to the general port costs but to the light dues—the British Steel Corporation, which we have been very much hoping to get back on to a profitable basis and into a state where it can be denationalised, finds that it is paying out £3 million in light dues. That is a very serious tax.
To give your Lordships a precise picture of how important this is, I would explain that we have built some very large ships. We have built the port at Port Talbot and we have enlarged the shipping into the Teesside works so that we can take big ships. That is to enable the corporation to bring high quality products from far distant countries overseas such as Canada, Brazil and even Australia.
However, if your Lordships look at the picture now you will find that a 100,000-tonner coming into Port Talbot or Teesside has a transatlantic freight rate of something just over £2 per tonne and it pays 18p per tonne in light dues. It pays a further 28p per tonne in port dues. The result is that the cost of port dues on that exercise represents a 25 per cent. increase on the 1209 existing freight charge. We managed to get the freight charge down but we are now faced with an increase in the overall costs, which are backing away from the exercise of getting the costs of steel down. And—let us face it—the costs of steel are vital for a large range of industries such as the motor trade, the manufacturers of refrigerators and so on.
It is only by going at every part of the exercise in manufacturing, right from the digging of the raw material out of the ground through to the finished product, that we can be sure of sense. Therefore I very much support the idea that light dues should be a national charge and that if possible we should share them with the other countries that are concerned.
I might also add that there is absolutely no use for lighthouses and other matters of that sort in relation to the ships I am talking about for the British Steel Corporation, because with their radar, their other gear and their knowledge of the ports they are concerned with, they do not need such navigational aids. So they are being charged highly for something which is of little interest to them.
We should seriously ask the Government to look carefully at how to revise this practice. Its origin goes hack to the 1890s when this country was the basis of an extensive industrial system, with a fine world trade picture and with few other countries seriously competing. It made probable sense at that stage, but today, with so many other highly competent industrial countries and with the degree of extension of merchant shipping and the need we have for our ports to be efficient and for our charges to be low, in order to take away the brakes that we put on the movement of export and import goods it is vitally important that we find a new way of carrying these loads.
Therefore we have to look on this as one of those hidden so-called barriers to trade which, in joining the Community, we had hoped to abolish. Here is one in our own court that we should be able to tackle and that we certainly ought to tackle. In my view as a shipper of goods abroad and as an importer of raw materials, the sooner the Government can get down to sorting out this problem and putting us on to a highly profitable basis in this area, the better.
§ 5.46 p.m.
§ Viscount Simon
My Lords, I am very pleased indeed to follow the noble Lord, Lord Layton, because he has brought home with his great experience the effect of this increase in light dues on the trade of this country, which to my mind is what really matters. I have spent most of my working life with the shipping industry and I am sure that shipowners feel very bitterly about it, because the costs come straight at them. But it is really the effect on trade that is more important than the effect on the shipping industry.
In the unavoidable absence of my noble friend Lord Kennet, who is still on the sick list, I should like to say a few words from these Benches in support of the noble Lord, Lord Underhill, who made an excellent speech. He laid out the position so clearly and so widely that he left very little for people such as me to follow with. He made the point—I want to repeat just this one point and I shall try not to repeat them all—that this increase has been introduced in direct disagreement 1210 with the Lights Advisory Committee, who said that no such thing should be done.
It seems to me an extraordinary case. I understand that the lighthouse fund has quite a large surplus and that it would be perfectly possible for any operating deficit to be met, at any rate for another year, by drawing on the reserves of the lighthouse fund, which I would remind your Lordships have been paid in the form of light dues by shipowners in the past. There is a large surplus available to meet a temporary overdraft, if I may put it in that way, or a temporary deficit in the working of the lighthouse fund. That would give time for the inquiries which are going on, to which the noble Lord, Lord Underhill, referred, into finding methods of improving the efficiency of the lighthouse authorities; that is, Trinity House, the Northern Lights and the Irish Lights.
I was not going to say any more about the immediate effect, because it has been put so well by both noble Lords who have spoken. But there are just two issues which I thought I should bring to the notice of the House. The first is the position of the Irish Lights. It appears that an agreement made a very long time ago with the Irish Government of the time deals with the distribution of the lighthouse fund into which these dues are paid.
I am informed that the net result at present is an annual subsidy, in effect, towards the maintenance of Irish lights from the dues paid by ships coming to UK ports. In the majority of cases, those ships are making no use whatever of Irish lights. I am very much in favour of friendly co-operation between this Government and the Government of the Republic of Ireland. We have now set up a piece of machinery where such matters can be discussed in a friendly way. I suggest that the Government might consider taking up with the Irish Government the possibility of making some change in the agreement. It appears to work out at present in such a way as to take dues from British ships and add to the problems that the noble Lord, Lord Layton, so vividly described, merely for the maintenance of lights around the coast of Ireland.
The second point I should like to comment on is the question of naval ships which do not contribute to light dues. As the noble Lord, Lord Underhill, has said, up to now the navy has been willing to pay what I believe to be £800,000 a year for the use of the Decca Navigation system. That is now being transferred to the lighthouse fund and apparently the navy is to get the benefits without paying at all. As I think has been mentioned and as I quite understand, naval ships today have modern equipment so that the need to rely upon the old fashioned and very valuable lighthouses is much less. However, that is just as true, as the noble Lord, Lord Layton, pointed out, of big ships that bring in iron ore or whatever it may be. Nearly all big ships are now supplied with the necessary equipment which makes them more or less free of the need to use lighthouses.
It seems to me that for the Government, through the Ministry of Defence, to allow naval ships not to make any contribution is quite wrong. If there is some principle involved, such as that the armed forces do not pay for those sorts of things, would it not be possible for the Ministry of Defence, in its Navy Vote, to include a small ex gratia contribution to the cost of 1211 the lights? Such a contribution would be completely lost in the defence budget. Nobody would ever see a contribution of £6 million or £7 million for the lights. And that might correct the difficulties we are up against. I leave those two suggestions with the Minister. I know that that is not his parish, so to speak. But the Government are one government, and he might like to pass those suggestions on.
§ 5.53 p.m.
§ Lord Greenway
My Lords, I should like to join other noble Lords in thanking the noble Lord, Lord Underhill, for bringing this matter to our attention. I am sure, recalling our deliberations on the Pilotage Bill when I spoke on behalf of Trinity House, he will not expect me to follow him in his remarks this afternoon. I think that it is important to put the other side of the coin in the debate.
May I first correct the noble Lord, Lord Underhill? He said that Trinity House is one of a number of bodies which support total central funding. Trinity House does not support total central funding. It supports central funding for a smaller number of different items which I hope to enumerate.
The increase in light dues, which totals 13.85 per cent., is largely accounted for by having to pay for the Decca Navigation system. Decca was having a good many problems because its sets, which are normally hired from the company with a licence fee being paid, were being pirated by outside manufacturers. Therefore it was not able to collect the money due and felt that it could no longer continue the present set-up. Decca went to the Government, who probably had no alternative but to do what they have done and put the charge on to the central lighthouse fund.
Perhaps I may go back to figures for a moment. It has been mentioned that this increase of almost four times the rate of inflation has brought the total increase in light dues to 65 per cent. since 1980. That does not quite tally with the figures I have before me, which are based on a reliable scale of charges from one of our ports. From 1980 until the end of 1986 when figures were last available, light dues have increased by 46 per cent. compared with an overall RPI increase of 73 per cent. So perhaps this increase has been slightly overstated.
The individual cost with regard to various types of ship has been mentioned. The noble Lord, Lord Underhill, mentioned a possible increase of £20,000. The noble Lord, Lord Layton, mentioned his problem with the British Steel bulk carriers. The noble Lord may well have a point. I am not well versed in bulk carriers. But the generally accepted cost of light dues for a large container ship is something like £15,000 a year.
It is probably not generally known that a finite number of payments is made in respect of each ship; in other words, there is a maximum of payments in any financial year. If a container ship is on regular transatlantic service it will have reached its limit on the inward leg of its fourth United Kingdom port of call.
§ Lord Gisborough
My Lords, the noble Lord said £15,000 a year, and not £15,000 a trip. Will he confirm that?
§ Lord Greenway
I beg your Lordships' pardon. I made a mistake and I apologise.
This ship will have paid its maximum after a fairly small number of voyages and on the remaining 26 occasions it will not have to pay at all. When we are referring to the complaints from the British Merchant Navy, for which I have a good deal of sympathy, its ships constitute only 10 per cent. or so of those calling at our ports today and it is mainly foreign vessels that bear the burden.
Before leaving the question of the container ship, perhaps I may say that the new international tonnage convention which came into effect in 1982 benefited container ships. The net tonnage on which these light dues are based fell considerably in respect of container ships, so they have benefited from that as well.
The noble Lord, Lord Underhill, called for all users to contribute to light dues. I know that Trinity House is generally in agreement with him on that point. He mentioned that fishing boats of a certain size are now to be included. I hope that the Minister will be able to confirm that regulations to that effect are about to go through.
§ Lord Underhill
My Lords, I said that I understand that the larger fishing vessels are to be included in a new regulation. However, if that is to be the case the larger pleasure vessels should also be included. To my knowledge there has been no statement from the Government to that effect.
§ Lord Greenway
My Lords, I was about to come to that point. Before I do perhaps I should mention the Royal Navy vessels and the other government-owned vessels such as the port auxiliary services, the Royal Fleet Auxiliary, the cable ships and so on. It is true that these vessels have not paid light dues, but as far as Decca is concerned the navy has made contributions in the past. The noble Lord, Lord Underhill, asked why there are not to be further payments. My understanding is that there has been some delay, but perhaps the Minister can confirm that it is still the intention of the navy to pay something towards the cost of the Decca service.
I am in a slightly difficult position, as some of your Lordships may realise, when referring to pleasure craft. I am a keen yachtsman and a spokesman from time to time for the Royal Yachting Association. The Minister, who is also a yachtsman, will appreciate my difficulty. Speaking as a yachtsman I would not mind paying a certain amount every year towards the cost of lights. However, from researches that have been carried out it has been found that it would not be cost-effective to include yachts because the amount of money obtained would be smaller than the cost of collecting it. Perhaps the Minister will confirm that. However, if that is so, could there not be a government contribution, bearing in mind the savings in centrally-funded search and rescue and anti-pollution costs that undoubtedly result from the provision by the General Lighthouse Authorities of an extensive and reliable system of aids to navigation?
The Irish question has been raised. I do not need to say any more than that Trinity House supports the general feeling behind the remarks of the noble Lord, Lord Underhill, and others, that this burden which 1213 comes on to the central lighthouse fund should he picked up by the Government. I agree that it is an advance on what took place previously. The Irish Government are now paying 40 per cent. towards the costs. Certainly Trinity House feels that the rest of those moneys should come from the Government. I do not know from which department—perhaps the Foreign Office—but that part of the funding should not fall on the shipowners.
There is another funding which Trinity House feels should be picked up by the Government. It relates to the provision of aids to navigation to mark the International Maritime Organisation-supported traffic separation and routing schemes such as that in the Channel which costs the General Lighthouse Authorities £0.6 million a year. Trinity House did not ask for those duties. They were imposed arising from a government decision. A large number of ships pass through the Channel every day and use these aids to navigation—special lighthouses and buoys. Those ships do not necessarily come to British ports but continue on to the Continent. There might be an argument for them to pay a contribution towards the cost of those lights and I should like to know whether the Government have considered that at any time.
It is not generally realised that Trinity House spends about £1½ million a year on certain navigation marks which come within port limits. Again, that is a charge that might well be borne by the ports themselves but I understand that they are not at all happy to pick it up.
I conclude my remarks—perhaps somewhat lengthily—by trying to answer the criticism which has come from a number of quarters that the service provided by such bodies as Trinity House is not cost-effective. On that subject, I preface my remarks by saying that many people tend to refer to these light dues as Trinity House light dues. In fact they are government light dues and Trinity House only collects them. It is only fair to say that it is recognised throughout the world that Trinity House is in the forefront of lighthouse technology. It has a great deal of experience in these matters.
In order to try to answer some of the criticisms that have been levelled against Trinity House, perhaps I may first point out that, as a result of the recommendations of the Arthur Young report, in January 1985 Trinity House reconstituted its board, which is now made up of four members who are executive directors, elder brethren of Trinity House and master mariners with a great deal of experience, balanced by four non-executive members nominated by the Secretary of State, who bring to the board a wide range of expertise in commercial and administrative areas.
Trinity House has been pursuing a programme of modernisation and has been looking very carefully into the question of whether the number of lighthouses and navigation aids can be reduced. The noble Lord, Lord Layton, and the noble Viscount, Lord Simon, said that with modern navigation aids ships do not need lighthouses any more. They may well have a point there if one were talking about an English manned ship carrying excellent equipment. Unfortunately, all ships are not like that. Many of them—excellent ships when under the British flag—have now been sold to third world countries whose manning standards are not the same as ours.
1214 While the Pilotage Bill was passing through the House, I heard a number of stories from pilots who board these vessels. They say that either the equipment is not functioning or that the officers do not know how to use it. What do we all do when, as sometimes happens, there is a power-cut and the lights go out? We rush for a candle. I suggest that it may be slightly premature to talk about doing away with lighthouses altogether.
Be that as it may, Trinity House has been looking very carefully at the situation and since 1984 has discontinued the use of a number of lighthouses: Great Orme's Head, St. Mary's in Northumberland, Spurn Point and Withernsea light. In the near future it will be consulting on whether to close lighthouses at Souter, South Foreland and Moelfre Point in Wales. I hope that the noble Lord, Lord Parry, whose speech will follow mine, will confirm that I have pronounced them properly.
The same situation is occurring with light vessels. The number of light vessels operated by Trinity House has been reduced considerably over a number of years. At present there are 21 light vessels, but of those only nine are still manned. The rest have been automated, and I shall say a little more about automation in a moment.
These days buoys arc perhaps more important than ever when we have deep draught vessels operating in areas in which they have not normally operated. That is another vital part of the service that is provided by the general lighthouse authorities.
There have been calls to reduce the number of tenders in the lighthouse service. In 1948 Trinity House had nine tenders. In 1978, that figure had been reduced to five. Today, it is four. That is expected to reduce to three when the new tender, which is currently on its way from Korea, arrives at the end of the month. The new tender was ordered in Korea. That caused a tremendous outcry at the time. By ordering in Korea, Trinity House has saved £5 million on the cost of the ship. It looks to its costs all the time.
Criticisms of the automation programme, which have been mentioned, miss the point that in addition to the personnel and logistical support savings obtained, the cost of modernisation of the stations concerned, which is at least equal to the cost of automation, is avoided.
The General Council of British Shipping has been invited to comment on all automation proposals since the programme was instituted 11 years ago. Until recently, it expressed no objection, and indeed three years ago was pressing for the programme to be speeded up. Halting such a programme at this stage would lead to a great waste of resources, public money and the time spent in setting up an organisation geared to eventual total automation of all those major aids to navigation for which a need will continue to exist for the foreseeable future.
A new light dues working party has been set up to consider what technical amendments can be made to lighthouse rulings without the need for primary legislation. The working party members come from the Government, the three lighthouse authorities and Customs and Excise. Unfortunately, it does not include the General Council of British Shipping, which was given the opportunity of joining but declined, which is a pity.
1215 I apologise for going on so long, but I feel that, speaking as the lone voice against the general tenor of the debate, the opposite side of the case should be put. The burdens on shipowners and ports is perhaps not so great as has been generally expounded. In fact, a Department of Transport report recently concluded that one-seventh of the difference in cost between United Kingdom and European ports was attributable to light dues but that the other six-sevenths (or 85 per cent.) was due more to operating inefficiency. That is a consideration which should be borne in mind.
The Government could help with regard to the items to which I have referred. I feel that, that apart, the Government have gone the right way about this, but overall, in the long term, careful consideration must be given to the whole problem of light dues.
§ 6.13 p.m.
§ Lord Parry
My Lords, the noble Lord, Lord Greenway, has been sailing, as he pointed out, a lonely sea. His voyage has been almost single-handed in nature and almost transatlantic in time and distance. As he is such a nice fellow and a friend of mine, I think that I should give the noble Lord some encouragement. There has been no criticism here of the elder bretheren of Trinity House. I have heard no noble Lord refer either to their service or to them in any derogatory way. All we have said is that changing technology may sometimes place changing responsibilities on them and perhaps we should look for means of payment other than the simple surcharge against the economy.
I am as grateful as the rest of the House to my noble friend Lord Underhill for having moved this Motion, for the manner in which he has presented it, and for having given Members such as the noble Lord, Lord Layton, the noble Viscount, Lord Simon, and, indeed, the noble Lord, Lord Greenway, the chance to respond to what the Government have done.
I wish to make two specific points. I believe that shipping, although much smaller than it was, is still fundamental to the British economy in two senses. It still carries to us those items which we need, and away from us those items that we need to sell and to distribute. Shipping is also the traditional barometer of international trade and the guidance for us. It is also important to say that there has never been an occasion when the British industrial economy has made an overseas credit balance of trade unless it has been led by shipping and the service sector. I have made that point in this House several times. It is worth making it quickly in this debate. When shipping does well then the economy generally seems to be in good heart.
However, I am more concerned about the imbalance in the maritime economy that is left to Britain rather than the balance of overseas trade. If anyone examines carefully the coastal ports of Britain they will see that the major ports along the western coast of Britain are dead or decadent or are trading under extreme difficulties. It is only on the South and South-East coast of Britain that ports which have containerised or prepared themselves for changes early are able to make a living. Even then margin of profit is such that they have to watch the cost of every container.
1216 I rise to speak in this debate as one who in the public/private argument was totally committed to the public sector of the economy. Arising out of that and out of my political connections, I became the head of a public enterprise in Britain and have had the responsibility over a number of years of running a public enterprise. I now have the responsibility—and it is a difficult and delicate one—of running a small company, the oldest public company in Wales, with 113 years of strike-free trading out of the harbour at Milford Haven. Having been the only port in Britain to trade throughout the general strike in ports fairly recently, Milford Haven is not now trading at all because it is having to restructure itself as a company in order to meet this delicate balance about which I have talked between profit and loss. Despite massive efforts to the contrary, we have had difficulties. We are restructuring to meet them. Every copper is important, and every cargo is vital. Every ship that comes into such a port is an essential cargo in local as well as in general terms.
When we see a surcharge made against the port, and against all the ports of Britain at this time, it seems to be illogical. The Secretary of State for Wales—who is a political opponent and a personal friend—is bending every effort to try to recreate within the dying ports of Wales a system that will support and help them and the community based upon them to re-equip. I cannot understand why his associate Minister, his right honourable friend, should be putting through legislation—perhaps for the best of reasons—that cuts across what he is doing.
The port at Milford Haven has become an enterprise zone. Every effort has been made to attract other ship-related and port and sea-related activities such as leisure and others to the area. However, in this country we pay very great service to our shipping, both naval and merchant marine, during times of war and national crises and we forget about their problems in times of peace. The same applies to the ports and harbours that rely upon them.
We therefore see a conflict between the Government's best intention to restructure these ports as they face difficulties and an academic exercise—which is an accountancy exercise—to pay within a sector for a service that is vital. I believe the service to be vital. I believe the service to be an excellent one and the envy of a great many people.
I have given my personal opinion. Let me quote the opinion given in the memorandum of the British Ports' Association. The noble Lord, Lord Layton, stated this so expertly, in his reference to valuable help. The memorandum states:1/7th of the overall cost difference between UK ports and Continental ports can be attributed to light dues, which are paid by carriers using our ports.Ports often fix an overall rate per container handled which on average absorbs the port authority's fixed costs and thus avoids penalising a ship arriving with a small number of containers. But light dues of up to £20,000 per visit for a large ship clearly have a deterrent effect on the handling of even quite significant part cargoes … A similar argument, scaled down, applies to smaller ships".As I have said, the Minister's colleague is trying to rationalise what is happening and to give some aid to the stricken ports. This series of surcharges hits a specific port, Milford Haven, in three ways; for 1217 example, it surcharges large oil tankers. We had hoped that the oil tankers in Milford Haven would be not simply the beginning of a new future for the port, but a new future for the whole of west Wales and other related industries which would have taken the Welsh economy forward. In fact, as that industry finds international problems making it revise its thinking, we have charges which affect large ships—and we are talking about multi tankers—more than they do most, certainly at the same percentage. The surcharges also affect smaller vessels tramping in part cargoes. We would love to have the bottom end of the shipping of Great Britain tramping into Milford Haven with part cargoes—it would be the answer to our difficulties.
A third way in which we are surcharged is quite criminal. When our British fishing industry is struggling to make ends meet, and when the EC seems almost designed to defeat Britain's trawler fishing fleet, here we find further charges on trawlers of a certain length. I did not intend to say this; but in view of what has been said, I say that if there are large pleasure vessels going to sea out of small ports and they are vessels that arc bought as a result of great effort on the part of the people who run them, who carefully assess whether or not they can afford them, then surely it is equitable that they should pay a charge towards the light dues. The trawler skippers, or the small fishing companies with vessels of the same length, have to add to their costs by doing so.
Finally I say that light dues should be removed altogether and the service should be funded, as the noble Lord, Lord Underhill, said, out of general taxation.
§ 6.23 p.m.
§ Lord Gisborough
My Lords, I should like briefly to support and thank the noble Lord, Lord Underhill, for raising this matter. The shipping industry has been under the greatest pressure for several years, with freight rates reducing by 20 per cent. over the last two or three years. I do not think the industry wants to have subsidy, but it faces a world where the Russians are known to run ships at less than cost and various other states run state subsidised fleets. The British fleet has to compete against this situation. This is fairly well indicated by the numbers of ships over 500 gross registered tonnes. Over the last five years they have reduced from 1,100 to around 700. While the industry may not cry out for subsidy, it can do without handicap.
Most of the points have been well covered on this matter. There is a dispute concerning the matter of inflation. The figures I have show that the charges have gone up by 65 per cent. while inflation has been 47 per cent. It appears totally anomalous that the British merchant fleet should subsidise another country, in as much as we subsidise Ireland to something like 60 per cent. of their costs. If that is so and we can afford to do that, why do we not subsidise a few other countries? I see no reason why a country which wants to go independent cannot be independent. If it does not want independence then let us carry on running it.
The Arthur Young consultancy stated that much of the economic management of the lighthouses could be improved and it mentioned that in Sweden no less 1218 than six times as many lights as in this country were serviced per man. In addition to that, in Sweden the men undertake various other tasks as well.
There is also the matter of the return. It has been suggested that many of the capital sums invested are for projects with perhaps a 15-year return. There is even a project mentioned that has a 34-year return. That kind of return would not be acceptable to commercial firms. A comprehensive study should be carried out immediately and certainly before the rates are increased. Perhaps we should think in terms of a little privatisation to make it more effective.
§ Lord Greenway
My Lords, before the noble Lord sits down, I should like to ask him whether he was referring just to the Russian merchant fleet or talking about light dues in general, because many Russian ships visit our ports these days and they all pay light dues when they come here.
§ Lord Gisborough
No, my Lords. I meant that the Russian fleet does not operate within the same cost disciplines as the British fleet must operate.
§ 6.26 p.m.
§ The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara)
My Lords, we have had an interesting, useful and wide-ranging discussion on an issue which I recognise commands a substantial degree of feeling in the shipping and ports industries as well as in your Lordships' House.
I fully understand the concern that has arisen over the size of the increase in light dues which the Government have felt it necessary to impose this year. But I can assure your Lordships that the most careful thought was given to this matter, and the decision was not taken without having the fullest regard to the representations received.
The regulations provide for an increase of about 13.85 per cent. in the light dues scale. That increase, self-evidently, is above the rate of inflation. Two factors have unfortunately coincided to make a large increase unavoidable this year. First, since 1981–82, light dues have steadily declined in real terms. Even with the increase that is the subject of today's debate they are in real terms still over 33 per cent. down from the peak in the latter part of 1975–76 and 18 per cent. lower than in 1981–82. That in itself is a considerable achievement and one not to be lightly dismissed. That reduction was achieved by drawing heavily on the General Lighthouse Fund's reserves. In fact, by the end of this year the reserves will be down to about £12 million, or about two months outgoings. But we have reached the limits of what we can prudently do in that way, and some increase in revenues is inescapable.
The increase could have been held at about 7 per cent. but for the need to find a new way of financing the UK transmitters of the Racal Decca Navigator system, which can no longer be provided commercially. That was the subject of a brief debate in your Lordships' House on 4th December last, when the House approved the General Lighthouse Authorities (Beacons: Hyperbolic Systems) Order 1986. I was glad to note at that time that the noble Lord, Lord Underhill, recognised that this seemed to be a very 1219 sensible and useful order. I am sorry that he has changed his mind. It had the practical effect of enabling the authorities to draw on the fund to finance the services which the Racal Decca Company is now providing under contract with them. The cost to the fund of this additional item is now estimated to be about £3.7 million in the current financial year.
This additional charge forms a substantial element of the increase in general light dues—almost half in gross terms. Part of those costs are expected to be covered by a contribution from the Ministry of Defence for the Royal Navy—several noble Lords have queried that, but I can confirm that that is the case—and the proposed extension of light dues to fishing vessels. Incidentally, the proposed increases to fishing vessels will be the subject of regulations to be brought before the House in due course.
The procedures for reviewing the budgets of the general lighthouse authorities include very close consultation with the Lights Advisory Committee, which strongly represents the interests of the shipping and ports industries. As an alternative to a large increase in light dues, the Lights Advisory Committee urged that there should be a freeze on the authorities' new capital expenditure. My right honourable friend the Secretary of State for Transport, who has the statutory control of the General Lighthouse Fund, considered this proposal. But he decided against it because he thought it would dislocate the lighthouse automation programme and generate nugatory costs.
That point was mentioned by the noble Lord, Lord Greenway, who explained it in greater detail. I realise that the Lights Advisory Committee would wish to see dramatic reductions in the authorities' running costs. But I think they recognise that these would only be feasible if there were corresponding reductions in the services provided. We would certainly consider proposals for such reductions within the context of our international obligations for safety at sea. But such changes—which would be for the authorities to implement—cannot come about quickly. The noble Lord, Lord Underhill, asked about the membership of the Lights Advisory Committee and why the employees of the general lighthouse authorities were not members of it. That is not a matter for the Government. The membership of that committee is decided by themselves and not by Ministers.
In the Government's view the immediate priority is for the costs of the lighthouse services to be contained to secure efficiency and economy in the existing operations. To this end, we continue to set demanding targets for the authorities' costs. Over £1.3 million was cut from their running cost budgets for 1986–87, and we have set austere cash growth targets: only 3 per cent. for the current year and no growth at all in 1988–89. Nil growth will effectively mean a cut of about 3 per cent. (at £1.3 million) in planned running costs next year, leaving the authorities to meet pay awards and other extra costs within a tight cash limit. It is to the authorities' credit that they accept the challenge to reduce costs, and indeed Trinity House has significantly bettered the targets we have set it. I congratulate it on the very positive efforts it is making to achieve savings.
1220 Further major savings are expected to result from the present study of the general lighthouse authorities' tender vessel requirements to which the noble Lord, Lord Greenway, referred. This study, which is being undertaken by independent consultants of international repute, is at an advanced state. I do not want to anticipate their report this evening, but I hope that the work will result in significant savings in ship procurement costs with obvious benefits to the future level of light dues.
Much has been said in this debate, and in the representations made to the Government, about transferring the costs of the lighthouse services to the Exchequer. I can hold out no prospect of that. The Government think it right that, within the limits of administrative practicability, the costs of these services should be met by those who use them. I note that the noble Lord, Lord Underhill's honourable friend, the Member for Wigan, the shadow shipping Minister in another place, was reported to have said in Lloyd's List that a Labour Government would meet the full cost of lighthouse services from the Exchequer. It is easy to see how a Labour Government could add £34 billion to the taxpayers' burden when they have such a cavalier approach to the sum of £60 million, which for my part I regard as very substantial. I wonder whether my noble friends Lord Layton and Lord Gisborough might not care to give that fact a little thought.
We believe that the principle that the user should pay is a valid principle, and we see no reason to depart from it. There is no evidence that the light dues regime is harmful to our economy or to the ports industry as a whole. I accept that some liner container traffic and part-cargo traffic in some circumstances may be diverted from a UK port to a near Continental port for trans-shipment, but the reasons for such routings are complex and go beyond light dues. As noble Lords have said, some six-sevenths of the cost differential between UK and Continental ports for this kind of traffic are due to reasons other than light dues.
The figures do not support the arguments that light dues damage trade. The latest published figures show a new record throughput of 451 million tonnes was achieved by GB ports in 1985. Non-bulk cargoes moving through British ports have increaed by an annual average of 4.3 per cent. over the last five years. That is a better rate than has been achieved by Dunkirk, Le Havre, Rotterdam, Bremen and Hamburg—ports often quoted as examples of facilities with greater financial advantages compared with their UK competitors. Light dues in 1985–86 amounted to only 0.04 per cent. of the value of UK imports and exports. The ports continue to report an improving financial position, and a recent BPA survey shows that pre-tax profits rose in 1985–86 from £41 million to £79 million on a turnover of£537 million, coupled with an improved average return on capital of 8.2 per cent.
Felixstowe, as our leading container port, reports box trade up by 23.6 per cent. in 1986—despite the claimed disadvantages of the light dues system for container traffic. The UK is, I accept, in a minority within the EC in pursuing this policy. But it has a longer coastline and a greater number of ports than most EC members. Within the membership of the International Association of Lighthouse Authorities a rather different picture emerges. In a 1983 survey (and 1221 the position is unlikely to have changed significantly since then) about 45 per cent. of the member states relied on dues of some kind as the sole source of finance for their service. Only about 36 per cent. of member states relied on general taxation or subsidy, and even some of these respondents to the survey charged light or port dues to some degree.
Unlike the noble Lord, Lord Underhill, and others I see little prospect of developing an EC policy on financing lights. Countries such as Belgium or Holland would have little interest in subsidising UK costs; and in any event we would consider EC funding inappropriate as it could only be achieved by a charge on public funds via the EC budget.
Retention of the light dues system necessarily means that substantial charges fall on commercial shipping. I recognise that a dues structure, substantially unchanged from the turn of the century, undoubtedly contains anomalies which we should address. We have undertaken a detailed study of the feasibility of technical changes and I believe some constructive and helpful reforms will emerge before long.
Against that background it is difficult to argue that light dues are a general handicap to the trade of this country. As I have indicated, we are prepared to look at anomalies within the system, and the way it affects different classes of ships, and to remedies and reforms where practicable. I trust the shipping and ports industries will co-operate in this task, recognising the differences between us on the overall funding issue.
Several noble Lords have suggested that light dues should be widened to embrace pleasure craft. The noble Lord, Lord Greenway, asked me whether the cost of gathering light dues from those sort of craft would exceed revenue. I have to say that we think it would, given that the maximum charge we could reasonably impose would be low and because pleasure craft are not at sea very often.
§ Lord Parry
My Lords, will the Minister tell me how he can reconcile that with the surcharge on the small fishing fleet?
§ Lord Brabazon of Tara
Very easily, my Lords, because all fishing vessels have to be registered and therefore we have an easy way of collecting from them.
The noble Viscount, Lord Simon, asked why we did not co-operate with the Irish Republic in these matters. We have made considerable progress with the Republic and we have negotiated a cost sharing agreement with the Irish Government under which they will pay a steadily increasing supplement to Irish light dues revenue. By 1989–90 the Irish will pay one-half of the costs incurred by the Commissioners of Irish Lights in the Republic or about three times the amount that would otherwise be paid into the GLF from Irish dues alone. We believe this agreement is a satisfactory settlement of a problem that has long existed, I think since 1922.
It is clear that the Government are not going to agree with the shipping and ports industries and indeed with the majority of your Lordships this afternoon about light dues. But there is a great deal on which we can agree in this area and I look forward with confidence 1222 to their co-operation, and that of the general lighthouse authorities, in achieving major cost reductions in the lighthouse service.
I am grateful to the noble Lord, Lord Underhill, for having raised the matter this afternoon. It is a question that needs airing even at this rather late hour on the eve of our Easter break. I can only say to the noble Lord and other noble Lords that I wish them all a happy Easter and a pleasant holiday.
§ 6.40 p.m.
§ Lord Underhill
My Lords, I am grateful to the Minister for his reply, because it will be valuable to have his statement on record. It would be wrong to abuse your Lordships' House by giving a detailed response to what he has said but in the light of just one or two points that have been made I think I must make some comments.
First of all, I am glad that my noble friend Lord Parry answered some of the points made by the noble Lord, Lord Greenway, because there was no criticism at all in my speech of Trinity House, whose services I generally admire. In fact only this morning—
§ Lord Greenway
My Lords, I was not implying that the noble Lord had criticised Trinity House in any way. I was implying criticism from elsewhere, which has been published.
§ Lord Underhill
My Lords, I am glad that the noble Lord has made that quite clear. Only this morning I had a letter from the Deputy Master of Trinity House, giving its answer to certain points put by the General Council of British Shipping. I deliberately cut out of my speech any points which might cause an argument between the general council and Trinity House. I wished to avoid that because I think most of us appreciate the work that is done by Trinity House.
The Minister said that he noted that I had changed my mind on the Decca system. I have not changed my mind at all. When the matter was introduced I thought it was a very good system to have; it was an advance. At that stage I think he would have objected if I had used the occasion to advance the case that the whole of the light dues ought to be transferred to a national charge. I had the opportuntity this afternoon of doing so. I have not changed my mind on the value of the system at all.
The last point I want to make concerns the noble Lord's criticism of my honourable friend Roger Stott in the other House on Labour's programme. The reason why we are concerned about making this a national charge is the same as that advanced by the noble Lord, Lord Layton, and others who have spoken today. It is in the interests of British ports, British shipping and British trade. Those are the main reasons why we wish to have this transferred to a national charge.
However, I am grateful to the Minister for his reply because, as I say, it will be valuable to have it on record. I am also grateful to all the other noble Lords who have taken part in this debate today, which I think has been a very useful and worthwhile one.
§ On Question, Motion agreed to.