Community Shipping Measures: ECC Report

HL Deb 14 February 1991 vol 526 cc238-72

4.47 p.m.

Lord Oliver of Aylmerton rose to move, That this House takes note of the Report of the European Communities Committee on Community Shipping Measures (28th Report, 1989–90, HL Paper 90).

The noble and learned Lord said: My Lords, I should like to begin by expressing on behalf of the House as well as myself my gratitude to the members of Sub-Committee E and to the witnesses who gave very useful oral and written evidence on which the Select Committee's report on Community shipping measures is founded.

As noble Lords will, I hope, have seen, the report and the accompanying evidence constitute a fairly lengthy document. I do not believe that it would be appropriate in the time allotted to attempt to summarise either the evidence or the 24 paragraphs of the report which contain the committee's opinions. However, I seek to say a few words about the general background to the Community proposals addressed in the report and then to draw attention to what appear to me to be the five most important and, in some ways perhaps, controversial aspects of the proposed measures.

The United Kingdom has traditionally prided itself on being a maritime nation. The proud boast of the Promenade concerts that "Britannia Rules the Waves" may no longer be even figuratively true; nevertheless, shipping represents not only a vital factor in national planning for defence, particularly at present, but is also an important sector of the national economy. That is so not merely in terms of registered tonnage but also in terms of the invisible contribution made by shipping services, management, chartering, financing, classifications, surveying, insurance and so on. Those activities have been built up and are centred on London.

Yet the past 20 years have witnessed an accelerated decline in the size not only of British but also of Community merchant fleets. Between 1980 and 1988 the tonnage was practically halved. Between 1970 and 1980 the Community share of the world fleet declined by about 3 per cent. to 29.7 per cent. However, in the ensuing eight years it fell to 15.4 per cent. The decline was not only in Community ownership but also in Community registration which, as a proportion of world shipping, slumped by over 28 per cent. in the period from 1981 to 1987. The causes of this have not been difficult to identify. Reduced worldwide demand for shipping services has produced a fall in freight rates. Flagging out of vessels, with the consequent lower wage and social security costs, has enabled ship owners, utilising open and offshore registries, to reduce operating expenses and to sharpen competition with Community registered shipping. At the same time the Community is facing fierce competition from the Far East and from developing countries, and all this has of course most serious consequences within the Community not only because of the effect on the employment and training of seafarers but also because of its impact on the shipbuilding industry and shipping services generally, and the obvious defence and strategic implications of a decline in the size and viability of national merchant fleets.

It is against that background that the European Commission, in September 1989, sent to the council a communication in which it proposed a series of measures which were intended to halt and, indeed, even to reverse the decline. There were proposed three council regulations dealing respectively with the establishment of a community shipping register, the definition of a community shipowner for the purposes of community legislation, and cabotage—that is to say, the provision of marine transport services between different ports within the same member state. In addition the Commission proposed a recommendation on improving the effectiveness of port state control within the Community.

Let me deal first with the concept of a Community shipping register. What has been proposed is a new European registry to be known as EUROS which is intended to confer certain advantages, and which will not supplant but will supplement national shipping registries so that ships taking advantage of it will fly not one but two flags; the EUROS flag and that of the national registry. The great majority of the witnesses who gave evidence to Sub-Committee E's inquiry gave this proposal a fairly lukewarm reception. The central idea was that this should be a parallel registry which would impose certain minimum requirements regarding wages, social security, and employment of community seafarers, but would be accorded certain advantages such as ease of transfer between national registries and preferential rights to carry food relief cargoes.

The view of most of the witnesses was that this was no more than a bit of symbolic window-dressing of no practical utility. An empty box, was how it was described by one witness. The committee's view, which is contained in paragraphs 65 to 67 of the report, is that it displays a rather more serious vice than mere lack of utility. Unhappily we live in a world in which flags of convenience proliferate, and in which ship owners who are minded to do so can reduce not only their costs but their responsibilities by registering their vessels in registries which have no genuine link at all with the nationality of the owners or of the crew, or of the centre of management, and which are selected purely and simply for the financial advantages which can be obtained.

The creation of yet another registry alongside the national registry of each member state is, in the committee's view, no more than the creation of yet another flag of convenience. It holds no attraction at all in the way of safety and operating standards which are not equally available by registration under the national flag. Indeed, it is doubtful how far the Community has or can readily establish machinery for the discharge of the duties of a flag state to ships on its registry. In the event of an incident on board or on the high seas it adds further complexity to an already complex legal situation. Like any other flag of convenience its sole attraction is financial and although, I suppose, it might be said to provide a symbolic assertion of European unity, the committee felt that this was not the way to tackle the very real problems of the Community fleet in meeting competition.

By establishing potentially a common flag the proposal might of course be said to bypass the problems that may arise in transferring ships between registries of member states, and there is indeed much to be said for easing transfer of ships between national registries within the Community. But the committee felt that this was an end that could profitably be pursued quite outside the framework of EUROS, as indeed has now been done at the Council of Transport Ministers last December.

By way of a side note I should perhaps say that there is a serious question here as to whether, and to what extent, such a transfer should be limited by the requirement of a genuine link between a ship and its state of registry, but it is questionable in any event how far that could usefully be debated in advance of the decision of the European Court in the Factortame case, the hearing of which has now, I believe, taken place.

There is also much to be said for encouraging and regulating the mutual recognition of seafarers' qualifications, but the committee again felt that this end was much better pursued on a general basis, and it agreed with the view of the Department of Transport that this would ultimately be best achieved by a specific directive. The committee's final conclusion, therefore, was that the EUROS registry proposal —and in particular the suggestion that it should be backed by a discretionary allocation of food aid cargoes, which runs quite counter to the general principles of the Community texts on tendering for contracts—is misconceived and unhelpful.

Other aspects of the Commission's proposals, however, provide a much more fertile ground for exploration. Let me take first the question of the need to legislate on freedom to provide cabotage services. Noble Lords may be aware that the United Kingdom does not impose any restrictions on the provision of shipping services between United Kingdom ports, so that there is nothing to prevent, for instance, a Greek ship owner from running a ferry service between Liverpool and the Isle of Man if he thought it to his advantage, so long as he complies with local regulations.

Some other member states—in particular the Mediterranean states—exclude nationals and firms of other Community states from cabotage services. The committee would very much welcome the lifting of all cabotage restrictions, but it rejected entirely the concept that this should be a privilege of ships flying the EUROS flag. The freedom to supply such services is a necessary step in the completion of the internal market in its own right, and should not be linked to a requirement of registration in an artificially created EUROS registry.

It has to be recognised that some member states, particularly Greece, with an extensive network of island communities, have special problems which might justify either the imposition of public service obligations as a condition of the exercise of cabotage rights, or the limitation of the trade to vessels of a certain gross registered tonnage. But there should not, in principle, be any restriction on the free exercise of cabotage rights within the Community, except such as may be necessary on a transitional basis or in order to guarantee continuity of service. In its 1986 report on European Maritime Transport Policy the committee expressed the view that the then existing restrictions on freedom to provide shipping services within the Community should be abolished. The picture has not changed, and the committee remains of that view.

Next, in drawing the House's attention to the report, I ought briefly to refer to the information document which accompanied the Commission's proposals and which is contained in Appendix 5 of the report at page 42. Noble Lords will be aware that Article 92 of the treaty proscribes the provision of state aids to particular enterprises, which will have the effect of distorting competition within the Common Market. The ability of countries outside the Community through financial and fiscal measures, or the operation of flags of convenience—or indeed simply through their lower wage structures—to undercut the rates capable of being offered by Community fleets has, almost of necessity, involved member states in providing, through state aids or fiscal reliefs, the means to enable their own domestic fleets to compete in the world market.

The problem is well-illustrated, for example, by reference to crew costs. Evidence given to the committee established that the cost of operating a 15,000 gross registered tonnage container vessel with a third world crew is some 350,000 dollars per annum. If it were to be operated with a Dutch crew it would cost 1,286,000 dollars.

But, of course, the use of fiscal reliefs to bolster national shipping and shipbuilding against competition from the third world may also, because each member state has its own idiosyncratic fiscal measures, have the effect of distorting competition in the internal market from other member states. The committee therefore welcomed the information document to which I have referred, which contains guidelines on the use of fiscal and financial measures, establishing as the criteria that aid measures must not be out of proportion to the aim of restoring a competitive Community fleet—and I emphasise the word "Community"—and that a ceiling should be calculated on the basis of the cost gap between the lowest cost Community flag and a typical flag of convenience.

It would not be appropriate for me to attempt to comment in any detail on the various forms of aid referred to in the document, save to say that the committee was particularly attracted to the provision of assistance for training costs. Evidence given to the committee suggested that the shortage of skilled seafarers was in danger of becoming acute and not easily capable of being reversed.

There was also a very imaginative proposal by the European Parliament to replace taxes levied on shipowners and on the wages of crews by a single tax on vessels linked to age and tonnage. The committee was compelled to the conclusion, however, that this would not be within the powers provided by the treaty. Whether and, if so, what fiscal assistance or relief should be given must be, and remain, a matter for Parliament. The committee did not feel it appropriate to do more than to underline the importance to the United Kingdom of maintaining a strong merchant fleet, from the point of view both of defence and of the economy, and, in the latter context, bearing in mind the desirability of maintaining London as the centre for the numerous ancillary activities connected with shipping.

There are two other aspects of the report to which I should perhaps draw attention. The first concerns the composition of crews on vessels in the Community fleets. Member states have their own individual regulations about this in relation to their own registries, but the EUROS proposal involved a compulsory requirement that all officers and at least half of the crew members should be citizens of a Community state. While the committee recognised the desirability of crewing Community ships so far as possible with Community personnel, it did not think it right that this should be imposed compulsorily by Community legislation.

However, the proposal brought to the fore another problem which was not embraced in the Commission's proposals; that is, the desirability that crew members should have a common language. The committee was very disturbed by evidence concerning the "Scandinavian Star" disaster and the inability of crew members in an emergency to communicate not only with passengers but with each other. This is a problem which all national authorities, including our own, ought to be examining urgently.

Finally, I should like to say just a word about port state control. The Commission's recommendation encourages the ratification of a number of international agreements relating to such things as load lines, pollution, safety and so on, and the implementation of a memorandum of understanding to which all member states are party.

In a climate in which a ship is sailing the high seas without ever visiting its state of registration, because it flies a flag of convenience, the responsibility for enforcing standards of safety must devolve more and more upon the ports which are visited. The memorandum of understanding between European states, to which I have referred, sets a target of inspection of 25 per cent. of foreign ships visiting ports in those states which are parties to the memorandum. But the evidence before the committee of the effectiveness of port inspections was conflicting.

As is stated in paragraph 86 of the report, the committee does not question that the United Kingdom adequately fulfils the requirements of the memorandum. Nevertheless, it expresses concern at the decline in the number of ships inspected by the Department of Transport, which it infers to be due to inadequate resources available to the inspectorate. There was a suggestion in the evidence that small ships in small ports are escaping inspection on a significant scale. If that is so, there is an obvious risk of potential disaster and no doubt the House will welcome some reassurance on that point.

I thought it right to draw attention to those specific points, but of course there are a number of other important matters which are covered by the report; for instance, the importance of clarifying—and this is a matter of considerable economic importance—the position of consortia and inter-modal services under Community rules, and the need for shipbuilding and shipping operations to be taken up by the General Agreement on Tariffs and Trade. In the end, however, the report speaks for itself and the committee's recommendations are summarised—I hope helpfully —in paragraphs 88 to 101 in Part IV. I hope that the report commends itself to the House. I beg to move.

Moved, That this House takes note of the Report of the European Communities Committee on Community Shipping Measures (28th Report, 1989–90, HL Paper 90).—(Lord Oliver of Aylmerton.)

5.6 p.m.

Lord Sterling of Plaistow

My Lords, I should like to begin my maiden speech by saying how grateful I am for all the many kindnesses and courtesies which I have already received in the short time that I have been a Member of your Lordships' House. Having been in this place for such a brief time, I had no intention of attempting to speak so soon after my introduction. The debate this afternoon is on the shipping industry and, in my capacity as president of the General Council of British Shipping and chairman of P&O—still, I may say, one of the world's leading shipping companies—some of your Lordships were kind enough to suggest that my views might be of some interest. I hope that your Lordships will bear with my inexperience in debate.

I should first like to congratulate the Select Committee on producing such a cogent and helpful report and the noble and learned Lord, Lord Oliver of Aylmerton, on his very clear introduction to it. I particularly welcome the Select Committee's report because it focuses on issues raised by the joint government and industry working party on British shipping, chaired by the then Secretary of State for Transport and myself and published last September.

There is a consensus running through the European Commission's proposals on shipping, through the report of the Select Committee and through the UK joint working party report. It is that a strong merchant fleet is essential for Europe but vital for Britain, not only for our international trade but also for our strategic needs. If we are to retain and enhance a strong merchant fleet, government must act now.

It is worth reminding ourselves of the significance of Great Britain being an island. Ninety-five per cent. of our trade in and out is still transported by sea. The Channel Tunnel will not change this significantly. British shipping is one of the biggest contributors to our invisible earnings —£4 billion a year. On top of that is the £1 billion plus earned from the maritime related activities of the City of London. Furthermore, what is vital in all this is that we have a fleet which is British registered, flying the red ensign, because shipping is our fourth arm of defence and has been for some 400 years.

This fact is all too often overlooked, but it is embedded in our history. The Elizabethan fleets, the Crimea, the African wars, both world wars, the defence of the Falklands and now the invasion of Kuwait, all focus on the strategic, military and civil needs for British ships and British seafarers. These are the reasons why the joint working party defined British shipping as, "a vital national asset" —a conclusion reached by five Ministers of State.

In Europe shipping faces strong competition from third world countries. The European Commission has wisely concluded that it is necessary to consider measures to reduce the disparities in operating costs between Community shipping fleets and their foreign competitors. Unfortunately, British shipping does not even have the fiscal advantages already enjoyed by our European Continental competitors. We cannot pretend that the British flag is other than in decline. The joint working party report makes it abundantly clear that we are at the crossroads. Sadly, the rate at which British-owned ships are registering under foreign flags is accelerating. Competition leaves us no choice.

The United Kingdom has pressing and immediate needs: 75 per cent. of our merchant ships will need replacing in this decade. We are building new ships, yet the rate of renewal for UK-owned vessels is virtually the lowest of all Community countries. Very large sums of money are involved. Fifty million pounds is required for a new container ship or a large freight ferry; £150 million to £200 million is required to replace "Canberra". We are building ships today with the very latest technology which will take us straight through to the years 2010 to 2020. The three variables of cost are the flag state's regulatory requirements, capital and crew.

On the regulations, the joint working party recommended a number of changes. The Department of Transport is making good progress in implementing them. The world has changed a great deal since the framework for regulating the industry was laid down by the Merchant Shipping Act 1894. The joint working party recommended a short enabling Bill to place shipping on the same footing as civil aviation. I hope that that can be introduced this year.

There is also the cost of capital. Again, the joint working party studied the impact of national tax arrangements on the capital costs of 15 countries, mainly in Europe. It concluded that British companies were fat worse off than most of their European competitors. It also concluded that the prospects for eliminating support in other countries are not encouraging. As regards the cost of crews, there can be a gap of several hundred thousand pounds per annum between the cost of employing a British crew and a crew of highly competent seafarers from the Far East.

We also have to meet the growing shortage of qualified seafarers which currently exists in developed countries, particularly among officers, and again particularly in Britain. Well-trained and well-motivated seafarers are an absolute essential to a successful shipping enterprise. The Commission has put forward proposals to help address these matters and to a great extent I share the Select Committee's views on the suggestions. Because of the nature of this debate, I have inevitably concentrated on those areas where there are problems and challenges and where action is urgently needed. But I should like to conclude on a positive note.

Today British shipping is more efficient and better managed than for many years past. We are well placed to take advantage of the upturn in world trade which will undoubtedly come. Maintaining the City of London as the maritime centre of the world must be based on a powerful UK-registered fleet. That will meet both our economic and strategic needs. I make no apologies for concentrating in my speech on British shipping because any debate in your Lordships' House about shipping will be entirely academic without a powerful British merchant fleet manned by British seafarers and flying the red duster.

5.15 p.m.

Lord Callaghan of Cardiff

My Lords, it is my very pleasant duty to congratulate the noble Lord, Lord Sterling, on his maiden speech; and I think that I can best do that by saying that I wish that the Benches had been crowded to hear what he had to say about this very vital industry that we are discussing this evening. It is quite certain that the industry has found in the noble Lord, Lord Sterling, and his presidency of the General Council of British Shipping, a most energetic and authoritative voice.

This House now has a most eloquent voice added to it on these matters and I am sure that we shall want to listen to the noble Lord and to his advice, especially on this matter as well as on others. I first became aware of his talents through Motability. He was the chairman and I was a humble member of the committee. I then saw clearly what he would have to offer to any industry in which he found his mark. The shipping industry has certainly been the one in which he has expressed himself. I am very grateful to him, and the nation should be also, for the work that he is doing in that sphere.

I express my thanks to the noble and learned Lord, Lord Oliver of Aylmerton, and to his committee, for the splendid report which has been produced; not only for its conclusions, but also for the mass of information which has been drawn out from the bodies which the committee asked to produce evidence. All the appendices are worth reading for that reason. I also wish to say with what envy I listened to the noble and learned Lord's lucid and concise summary of the many pages contained in the report. I wish that I could do the same. We are very much in his debt for what he has done.

In the course of his remarks the noble and learned Lord pointed to a number of conclusions which the committee reached. While I wish to follow the noble Lord, Lord Sterling, in some of the things he said, I also wish to say in a sentence or two my reactions to what the noble and learned Lord had to say. It is only respectful that I should do so. He correctly said that the proposed EUROS parallel register had received a lukewarm reception from witnesses. The committee's conclusion was rather harsher than the way it was put by the noble and learned Lord. The committee said that it was misconceived and unhelpful. In that case there is no need for me to say more. I absolutely agree. Although it would no doubt have higher standards than some of the flags of convenience to which he referred, to some extent it is window dressing and evades the real problems that certainly this country has to face in the world of shipping. I shall try to avoid using the phrase "a level field" in talking about shipping and seafaring, though I am sorry to say that it appears in the report. This country has the greatest concern about these matters.

I now turn to the question of cabotage. To one who has had some slight connection with the shipping industry and observed it from afar over many years, I have been astonished and shocked at the manner in which our coastwise trade has declined over the past 40 years. It is absolutely astonishing that a nation like ours should have allowed its coastwise trade to disappear into the hands of others in the way that it has.

I was given a new argument as to why we should not have allowed that to happen. It is an argument that will perhaps appeal to the environmentalists. I am told that one gallon of diesel can move 500 times more freight when used in a ship than in a heavy goods vehicle. That is an astonishing statistic, if it is true. The clever economists work these things out and I dare say that they can prove almost anything; but if that is so then certainly in environmental terms we could conclude a remarkable benefit from that. It is a fact that we have taken rather less care of our coastwise trade than we should have done.

The committee said that it would welcome liberalisation overall, but I am bound to say to the noble and learned Lord that I see little prospect of that happening unless another Chaim Weizmann can be found, of whom it was said that he made the seemingly impossible happen. That is about the fairest summary one can make of that proposition.

On financial and fiscal aids, the committee pointed to the useful document that had been produced. Here I must emphasise to the noble Lord who will reply that while aid measures must not be out of proportion to the objective of restoring competitiveness, as I understand was the conclusion both of the Community and of the committee, nevertheless fiscal and financial aids are a matter for national competence. That point was very clearly established by the noble and learned Lord, Lord Oliver of Aylmerton, and his committee. It therefore falls to the Treasury to determine what, if any, measure of aid should be applicable to British shipping.

The report drawn up by the noble Lord, Lord Sterling, and Mr. Cecil Parkinson when he was Secretary of State is a very valuable document. However, the terms of reference—I have no doubt that the noble Lord, Lord Sterling, had to agree to this emasculation as otherwise he would not have got Cecil Parkinson along with him—meant that they had to exclude from the report any consideration of fiscal or financial matters. Therefore, while the report is worth reading and has some useful proposals to make, it is rather like Hamlet without the prince. I do not see any way in which we can hope to prosper unless there is some fiscal or financial aid from the Government.

Those are my reflections. I hope I have paid due respect to the report of the committee. There are one or two other matters on which I should like to comment. In doing so I hope not to overlook all that has been said by the noble and learned Lord. I want to ask the Government quite pointedly about their attitude and policy. They have an opportunity to explain it this evening. Shipping is a cyclical industry which is now at one of the critical points in its development. We go from feast to famine in the shipping industry. Either many new ships are being built or everyone is saying that there is no prospect of building any ships at all. We are now at the point, as the noble Lord, Lord Sterling, reminded us in his report, when over the next decade there is likely to be a substantial shipbuilding programme. How far is Britain to be part of this? I regret that our shipbuilding industry has been wiped out for all practical purposes. We shall have no part in that aspect of what is to take place unless there are dramatic changes.

How much of a future does British shipping have in this changing situation in which, as the noble Lord, Lord Sterling, reminded us, we are engaged? As he rightly said, and indeed as the report states, shipping is a vital national asset. We must get that point through to the Treasury. I hope that the noble Lord who is to reply to this debate will take back that message. I am sure it is the view held by everyone who studies the problem and thinks about it. It is a vital asset. It is not just a desirable industry and an occupation that we should keep going; it is a vital asset. That consideration ought to determine where the Government stand on this issue.

I agree that the figures quoted by the noble Lord, Lord Sterling, about the dramatic decline in the size of the British fleet rather overstate the picture because of the number of ships "flagged out"; that is to say, placed under flags of convenience while still under British ownership. That defence is used by those who wish to say that much is well with the British shipping industry. I agree that we should take those ships into account; but they are not wholly under our control. In any case, ships that are placed under a flag of convenience lose British jobs, lose British revenue and lose British influence in many ways. There are understandable reasons why they have been flagged out. As the noble and learned Lord, Lord Oliver of Aylmerton, said, it is partly because of the increased costs of running British ships. He quoted one comparison. Another comparison was given in evidence to his committee. It was told that it costs two or three times as much to run a ship under the British flag as it does under a flag of convenience crewed by other nationals.

There is another reason why we should not be complacent about flags of convenience and assume that much is well if we have British ships sailing under other flags. I refer to the defence aspect. Those who follow these matters will have observed that in the Gulf war some foreign crews manning UK vessels have refused to sail to the Gulf. In some cases they have done so because of regard for their personal safety and in other cases because the financial inducements have not been sufficient. Orders may be issued to a British ship. The Ministry of Defence, instead of commercially chartering it, may decide for defence purposes to requisition it. The orders may be issued, but who will come when those orders are given? We cannot be certain what will happen. The defence consideration is another reason why we cannot be complacent about flags of convenience and why ships should be brought not only under British ownership but under the British flag as soon as possible.

At Question Time yesterday I asked a supplementary question about what was happening regarding the strategic maritime review. The review arose out of the joint working party's report, which was prepared by the noble Lord, Lord Sterling, and Mr. Parkinson when he was the Secretary of State. Paragraph 2.18 of the report states: The extent to which the country's strategic defence requirements will continue to be met"— that is, by UK registered shipping— does not form part of our review and is subject to separate study by the Government". I thought it perfectly reasonable to ask the noble Earl, Lord Arran, who, after all, answers in this House for the Ministry of Defence, about that review. I was slightly surprised when he said that he really did not know and that perhaps he could write to me about it. I do not know what value or importance is being attached to the review but it does strike me as slightly surprising if the Minister who answers in this House for the department is not even aware of what is taking place. Perhaps we can have an answer today as the noble Earl promised in a most courteous way to write to me.

To be fair, the Government have taken some action, with the passage of the Merchant Shipping Act 1988, to assist the industry. However, their policy and attitude need much clearer definition. The evidence given to the committee by the Department of Transport was, with respect to the Minister, fairly complacent and out of this world. Page 61 of the department's evidence deals with the Government's policy. It states: The Government is concerned to see an efficient, entrepreneurial Community fleet. It believes this will best be achieved in a free market, without subsidy". I should like to believe in Father Christmas too. That is certainly not a policy. It may be an aspiration—it must be a hope, I suppose—but it does not represent what the Government should be doing. Our American friends would no doubt say that it is like a belief in the virtues of motherhood and apple pie. It has no more relevance to the world in which we live than that. I was surprised that the Department of Transport said that that was its approach to the whole question of shipping. However, it has done a little better by recognising the fact that there is not the remotest prospect of a free market without some kind of financial aid for shipping; and steps have been taken to achieve that aim.

I believe that the steps taken by the Government thus far are inadequate. They will have to do much more, particularly in regard to their financial role. Two objectives are quite clear. The first is to ensure that shipping companies have the finance to maintain an up-to-date fleet and to rebuild it now that it is becoming older. Secondly, incentives must be offered to encourage more of our young men and women to become seafarers because at present the competition is not equal.

I now concentrate on a few important matters. The Government have assisted in training. They have met part of the cost, but it is part of the cost of training officers and not the cost of training ratings. We need skilled ratings almost as much as we need skilled officers. I do not understand why, just because the Treasury has its fingers in the matter, the Government refuse to meet any part of the cost of training ratings and will only meet the cost of training officers. Ratings also need a career and they will not go to sea unless they feel that there is sufficient incentive in the form of advancement. Next, there is repatriation. The Government have also assisted in that respect by meeting 40 per cent. of the cost of flying a crew home. That is indeed a help; but it is not sufficient to meet the real problems.

I turn now to the most important point of taxation. The Budget is upon us. It is within our national competence to give relief and it is needed as a matter of urgency. Let us consider the position of seafarers. As regards the rules for relief I understand—my Inland Revenue knowledge is a little rusty—that to avoid taxation a seaman has to be at sea, or abroad, for 270 out of 365 days. That provision cannot cover the coast-wise or short-sea trades. According to one figure put forward by the General Council of British Shipping only 1 per cent. of our seafarers qualify. I see that the noble Lord, Lord Sterling, is indicating his assent. However, if that is so, it is an absurd concession if only 1 per cent. of our seafarers can benefit in that way. I trust that the noble Lord, Lord Brabazon of Tara, will consider the matter energetically to ensure that at least our people are treated on the same basis as those in the Scandinavian countries. We could learn some lessons from them as regards the manner in which they treat the taxation of their seafarers, including those who work on the ferries. Their system enables them to develop a pool of seafarers, whether abroad or at home, from which reserves can be drawn. We need trained seamen and we need them badly.

I turn now to the question of national insurance. In its recent submission the General Council of British Shipping put forward detailed proposals for better treatment and, again, makes comparisons with the Danish system. The Scandinavian countries have achieved a great deal more than we have in this area, but at the same time they have kept within the requirements of the Community and international obligations. In my view, it is our task to do the same. The council even went so far as to say that if its proposals were adopted it would mean a 25 per cent. cut in the wages bill. If that could be achieved, it would be the biggest incentive of all to flagging. I urge the Minister to press the Treasury on those matters.

There is also the question of the poll tax. The local authorities have had some discretion in this connection. The Department of the Environment issued a practice note suggesting how local authorities should deal with the matter. It was suggested that seafarers could be exempt if they spent more than six months continuously at sea. However, voyage agreements do not operate in that way. Such agreements are usually of three or four months' duration. The result is that most of these people have been excluded from the exemption. Moreover, and even worse, is the implication of a case about which I heard today, though I have not had the opportunity to check the matter. It appears that a judgment was given today in the High Court which reverses the modest concession which has so far existed. A seaman in Bradford had been given some kind of exemption by a local tribunal because of the time he was away from home. Bradford City Council took the matter to the High Court and it seems that the relief decision has been reversed; so everything is back in the melting pot.

There are two further points I wish to make; and I apologise to your Lordships for taking so long with my speech. I shall deal first with the inspection of foreign ships. Norway is far more rigid in its inspection of foreign ships than we are. There is clear evidence—and I believe that members of the committee felt this also, though they expressed it in a rather more gentlemanly way—that international agreements for the minimum standards to be maintained are not being observed by many countries. If we are anxious to build up our merchant fleet, as we must be, and if we want to keep within the rules then let us enforce the safety requirements and other provisions as regards the ships that enter our ports, as do the Norwegians and the other Scandinavian countries. If ships do not observe the rules we should pin an Admiralty notice on the mast and not allow them to leave until they have put right the deficiencies. In other words, let us be much tougher in this respect than we have been and see what can be done.

I have a final structural point. I do not want to build bureaucracies, but I have felt for a long time that shipping policy in government circles is fragmented. That is exemplified to some extent by the composition of the committee with the noble Lord, Lord Sterling, and Mr. Parkinson. Half a dozen departments were represented on it. Frankly, with due respect, the Ministry of Transport—and I speak as one who has great affection for that ministry—does not carry a powerful enough voice. When I had some responsibility in the matter, I asked Lord Peart, who will be remembered by some noble Lords, to take the chair of an inter-departmental standing committee to keep under constant review the position of British shipping and to reconcile the conflicting policies of some of the departments; thus ensuring that we were not losing out in what was an extremely competitive field where, undoubtedly, we were falling behind.

I do not know what the fate of the joint working party will be. It seems to me that it is an embryo which could be turned into an inter-departmental committee chaired by a senior Minister and set up for the purpose of monitoring continuously what is happening in the international field of shipping. It could ensure that we all move forward together in order to make certain that this vital national asset is maintained and that we do nothing, by our neglect, to fail to ensure that we maintain the highest possible standards. We must build up this fleet which, unless we take the appropriate action, will wither even further than it has thus far.

5.37 p.m.

Lord McGregor of Durris

My Lords, like the noble Lord, Lord Callaghan of Cardiff, I congratulate the noble Lord, Lord Sterling of Plaistow, on his maiden speech on the subject about which he speaks with high authority and a wealth of experience. We all look forward to hearing his future contributions to our debates.

Your Lordships' committee's report on Community shipping measures arises from the second package of proposals within the past five years from the Commission to halt the decline in the merchant fleets of the member states. Both in absolute tonnage and in their share of world shipping the decline has been steep, as the noble and learned Lord, Lord Oliver of Aylmerton, explained. The tonnage was nearly halved between 1980 and 1988. The share of the world's fleet fell from 1970–80 to 30 per cent., but that share had declined again to 15 per cent. by 1988. In terms of both ownership and registration in Community member states, the Community share of world shipping had declined further between 1981 and 1987 by about 28 per cent. The fall has been especially severe in the UK fleet. But, even so, Community ship owners represent in ownership about one quarter of the world's tonnage and are regarded, perhaps optimistically, by the Department of Transport as still major players in world shipping, and they are present in all sectors of shipping.

However there is, as the General Council of British Shipping told the committee, a pressing need for worldwide fleet renewal in the 1990s. Between 1986 and August 1989, when the new proposals appeared, the world fleet had aged inexorably. The point has been reached, according to the general council, when that represents the major problem now confronting ship owners. That applies to all Community fleets, but above all to the United Kingdom.

The present United Kingdom-owned fleet is now older than the world average. The current order rate in the United Kingdom is well under half that required to maintain the present fleet size and efficiency. Although rates of return have begun to improve in some sectors, they still do not justify reinvestment in ships by comparison with investor expectations in other business sectors or in other countries. Those circumstances, together with the losses from flagging-out, will have significant effects in the United Kingdom which, according to the United Kingdom Centre for Maritime Policy Studies in evidence to the committee, derives large earnings from related maritime service businesses, including ship management, insurance, chartering, finance, classification and surveying. All of those were built up in England because we had a strong domestic registered fleet. All its functions were carried on here. It is much more difficult, says the general council laconically, to maintain such businesses if one has no home-based fleet. It is vital for our economy that the shipping industry and its ancillary services should be given a competitive environment in which they can best thrive.

One further consideration stressed by several witnesses and by those of your Lordships who have spoken, of which we have had a sharp, recent reminder, is the importance of merchant shipping, skilled seamen and highly-trained officers for defence and to be available in emergencies. Accordingly, the committee accepted without qualification that there is a strong case for Community measures, although it was not persuaded that the Commission had given a convincing answer to the central question: should the Community strive to keep alight the beacon of its own free market principles, or should it descend into the protectionist battle?

The reality, as the committee sees it, is that the Community has limited possibilities of building effective barriers around "Fortress Europe" within which it can police state aids to shipbuilders and operators so as to guarantee application of free market principles internally while excluding competition. Ship owners and shippers have to operate in the world of state-subsidised shipbuilders, flags of convenience, erratic standards of port state control and crews on third world wages with no social security. Accordingly, the committee concluded: Neither the Community nor its Member States are in a position to remedy the unsatisfactory system of flags of convenience on their own. But they should avoid compounding the mischief'. In its view, the proposed Community register (EUROS) and flag would become a new kind of flag of convenience. The flag would denote not the acceptance of legal responsibilities to enforce norms and standards but the availability of economic privileges. The Community's response to a system under which ship owners choose a flag for their ships not by reference to their own national or economic links, or those of its prospective crew, but by reference to the cost entailed, should not be to set up a new flag whose main attraction would be financial. The committee added: Community law has not yet reached the point where the authorities of the Community can properly discharge the duties of a flag State towards ships on its registries". The committee accept that a single Community flag could have symbolic value, but regards emphasis upon such a concept as a distraction from the real problems of shipping. Although the committee rejected the Commission's proposal for a Community register and European flag, it welcomed many of the other proposals contained in the package. They included a call for the abolition of the remaining restrictions on freedom to provide cabotage services throughout the Community. Such freedom is obviously a prerequisite of completing the internal market. The British shippers' council, with nearly all other witnesses before the Committee, laid strong emphasis upon that point. The committee observed: It remains quite wrong in principle that cabotage rights between ports in Northern Member States should be open to all while in Mediterranean States, nationals and firms from other Community Member States are excluded". I hope that the Minister will be able to tell the House what further steps the Government have in mind on that issue.

Another concern of the committee stemmed from the "Scandinavian Star" disaster which revealed that the crew was unable to communicate effectively among one another or with passengers because they had no common language. Mr. David Tomlinson, director of the United Kingdom Centre for Maritime Policy Studies, told the committee: the ability to communicate in a common language with each other among the crews—it does not matter whether it is a Community or a non-Community crew—… is absolutely essential. It is a point we would emphasise that with 2,000 passengers on a cross-Channel ferry, the seafarer crew is probably about 18 people and you do not see them. There is then an auxiliary crew—catering staff and the duty-free shop staff—who are the people the passengers see—and the passengers have to communicate with somebody in an emergency, so we think they are very important. Our proposal would be that the ship's safe manning certificate would say what was the language of the ship. In other words, it would be a German language ship or an English language ship or whatever. That should be appropriate for the service on which it was operating, and is something that the port states, under port state control, could probably implement with some additional legal provision. One other point is that the language requirement should cover the signs and the safety instructions to ensure that they were all printed in the language of the ship. We do not want a ferry with English and Norwegians on with all the signs in German and that is perfectly possible at the moment". It is improbable that the EUROS proposal could be the vehicle for change in order to achieve such objectives. The committee therefore urged national authorities to examine whether the requirements imposed in the context of issuing safe manning certificates are adequate to protect the lives of passengers and crews in an emergency. I hope that the Minister will be able to give the House an assurance that the Government are seized of the public anxiety about the safety of ferries and will act at least in respect of the language requirements to relieve it.

I conclude by thanking the noble and learned Lord, Lord Oliver of Aylmerton, for his masterly comment on the committee's deliberations. Speaking as one of the small number of members of his committee not learned in law, I thank him for the patience and clarity with which he inducts the laity into its mysteries.

5.55 p.m.

Lord Greenway

My Lords, I too wish to thank my noble and learned friend Lord Oliver of Aylmerton for his excellent report and the concise way in which he dealt with it this afternoon. I also wish to add my thanks and congratulations to the noble Lord, Lord Sterling, for his excellent maiden speech. We look forward to hearing him often on this subject in the future. Without wishing to make a pun, I believe that he has done a sterling job in promoting the interests of the British merchant fleet through his presidency of the GCBS. In particular, he has made the shipping industry more aware of its own importance. He has brought a little—I might even use the word—pride back into the shipping community, which was necessary.

We still have a long way to go, but the Government are now much more aware than they were of the problems facing the shipping industry. But the public are still largely ignorant of the fact that we have a merchant fleet. Much work must be done in education, and I am happy to see that a start has been made in this, sponsored by the GCBS. We must return to the old days so that the average person in the country knows that we need ships and cries out for us to have the ships we need.

In his introductory remarks my noble friend mentioned the problems facing the shipping industry, particularly in Europe, and the decline over the past approximately 10 years. He also mentioned the rise of the eastern fleets. It is worth noting that the Japanese are wasting no time in buying European shipping companies, especially in the car transportation business and also recently in the container business, in order to gain an entrée to the market when it arrives in 1993.

Other noble Lords have said all that is necessary on the points raised in the report. I shall embellish one or two without taking too long. I am delighted that the committee gave the thumbs down to the EUROS register. I believe that would it have been just another flag of convenience but I hazard the guess that it would have been a heavy handed one, to boot. We are well out of that line of approach.

Cabotage has been mentioned by all noble Lords who have spoken. In a perfect world we should like to see all restrictions on cabotage trading removed, but it must be recognised that there is a special case with the Greek islands and also possibly the Italian coast. In regard to the latter, I understand that the Italians are planning an imaginative roll-on, roll-off service down their coast which it is hoped will take 30 per cent. of the road traffic off the Italian roads. This is a most desirable social end and the Italians would rightly be distressed if another country came in and undercut the ships being built for this specific run.

The question will have to be considered further. Perhaps there should be a hold for the time being—I do not suggest it should be too long—on the Italian and Greek problems. I often wonder what the position might be if the Greeks, who are quite entitled to do so, were to send a ship to our waters in competition with MacBrayne's on the western islands services. I cannot help feeling that the whole system would grind to a halt very quickly.

To give another similar example, I understand that a few years ago someone on the Thames chartered two German tugs to provide a tug service on the river. The tugs were quickly blockaded by one of our own tug companies and were not allowed to carry out the job for which they were chartered. There could be no end to such an activity. Even with totally free cabotage I cannot help feeling that the high subsidies paid for island services—and the Greeks certainly pay them —would mean that anyone else wishing to enter the trade would find it difficult without a subsidy.

The desirability of training more crews has been mentioned, particularly by the noble Lord, Lord Callaghan. We in this country and in Europe must pursue the matter much more vigorously. Perhaps I may quote two paragraphs from a document produced by Drewry Shipping Consultants called Ship Costs: Their Structure and Significance": The outlook is for an end to cheaply-acquired and cheaply-run ships, as both the market place and environmental concerns exert potentially irresistible pressures ‖ The emergence of a seemingly endless stream of new registers has facilitated the pruning of indirect costs, while increased use of automated equipment has led to cuts in crew numbers, but it appears that the end of the line has now been reached. Crews —quality or otherwise—will be an increasingly scarce resource". This is a worldwide problem which we must address. The Government have gone some way towards assisting in the training of crews and in repatriation costs, as mentioned by the noble Lord, Lord Callaghan. However, we must somehow work together to produce a proper scheme that will ensure that enough UK crews are available to meet our future needs.

It is not just our future needs: a situation has arisen relating to the Gulf crisis. The owners of some of the foreign ships chartered by the Ministry of Defence have been falling over themselves to try to recruit British crews to replace third world crews who have refused to sail into the war zone. If such a situation were to arise in future, we should make sure that we have the requisite number of British crews to perform such tasks.

Port state control has also been mentioned. I reinforce the call made by my noble friend for the Government to restore to its former high level the number of inspections carried out in this country. That is most important. Our record has been better than that of a lot of other European countries. I hope the Minister can give us some more information on the number of inspections being carried out in other EC countries, in particular in Spain where I understand hardly anything has been done at all.

The port state control system is a good way of getting rid of old and potentially hazardous tonnage. However, I suggest that insurers also have a part to play here. We cannot continue to cut insurance rates forever. A halt must be made and insurers must get together to improve their policies to ensure that these potentially dangerous ships, and the use of rather dubious registers, are excluded in future.

Before I leave the question of safety, I should add that the noble Lord, Lord McGregor, touched on the matter of ferry safety in particular. I hope the Government will not proceed down the unilateral road with their new ferry regulations. In the past the Government have always been against unilateral lines. I hope they will reconsider this matter and perhaps wait for the International Maritime Organisation to sort the matter out in due course.

I shall conclude on a rather lighter note. I could not help noting that the General Council of British Shipping has appointed for the first time as its new director general a retired admiral. I also note that he is a deputy managing director of Eurotunnel. I sincerely hope that I am not reading anything too ominous into that appointment. Perhaps it merely has something to do with the fact that the noble Lord, Lord Sterling, has recently been promoted to the position of honorary captain in the Royal Naval Reserve. I wish the gallant admiral well in his new task and I sincerely hope that he will have a few ships to look after. That will not be the case if the Chancellor does not respond in his next Budget to the many calls —including the most powerful plea just made by the noble Lord, Lord Callaghan—for fiscal help to halt once and for all the decline in our vital merchant navy.

6.3 p.m.

Lord Murray of Epping Forest

My Lords, in his most helpful introduction to this valuable report, the noble and learned Lord, Lord Oliver, referred to the Commission's information document on financial and fiscal measures. Paragraph 1 of that document sets out succinctly the objectives of the Community's shipping policy as the, maintenance of ships under Community flags and the employment, to the highest possible proportion, of Community seafarers on board such ships". The arguments for maintaining a UK merchant fleet are the same as the arguments for maintaining a Community fleet. The latter arguments are set out in that document. However, the arguments in the UK's case are even more powerful. The United Kingdom has few areas of comparative advantage in Europe or in the world. However, our merchant navy is one such area and it is outstanding. We possess a wealth of experience and expertise, not least in the quality of our seafarer. That has been mentioned several times this afternoon. We also possess particular experience and expertise in the quality of our officers.

I may be accused of prejudice in so far as I am a trustee director of the National Union of Marine, Aviation and Shipping Transport Officers. However, if that is the case, I am in very good company. When evidence was given to the committee the point I have just mentioned was made again and again by the General Council of British Shipping, and again this afternoon by the noble Lord, Lord Sterling. I welcomed his positive and distinguished contribution this afternoon. His remarks were doubly welcome coming from the other side of the House. I agreed with most of the noble Lord's analysis and with many of his proposals. I disagreed with the noble Lord on details rather than on objectives.

Previous speakers have documented the decline in the Community fleet. We should remember the context in which that decline has taken place. The Community's external trade accounts for 40 per cent. of world trade. The Community's external trade is greater than that of Japan and the United States put together. What has happened in the UK is not unique, but it has been worse than the experience of other countries. Figures have been given this afternoon, but I hope may add a further figure. In 1990 we lost another 26 ships comprising 1 million dead weight tonnes. That means that our fleet now comprises less than 4 million tonnes. It is the big ships that are going. But deep sea tonnage is critical if we are to train officers and seafarers.

If we want a monument to what happens when shipping is left to the operation of free market forces we should look around our ports. What we are discussing today is whether that situation matters. The British Shippers' Council in the evidence it gave to the committee made it clear that it considers it does not matter. It stated: Commercial patriotism is simply not a relevant factor in the decision-making process". For too long the Government have appeared to share that attitude. The results can be seen all around us and they have been mentioned this afternoon. My noble friend Lord Callaghan referred to the chartering of ships for the Gulf. For far too long the Government have argued that we can bring back flagged-out ships. That is easier said than done. But even if we could bring them back, we could not man them given the drastic decline in British manpower.

I have a final statistic to give to the House. In the past 10 years we have lost 20,000 officers from the merchant fleet. We are not replacing them. The report documents the intake, or rather the lack of intake, of cadets. In 1980 the rather low figure of 1,200 cadets was recruited. By 1987 the figure was down to 160 cadets. Something was done about that position and by 1989 the figure had risen to 400, and I believe it is now a little higher than that. However, that is not nearly enough. We are facing a severe prospective shortage of manpower. Is the answer to man our fleet with Polish or Filipino officers? I am not sure whether I detected a comment on that matter in the speech of the noble Lord, Lord Sterling. We are facing a worldwide shortage of manpower. BIMCO has forecast a worldwide shortage of nearly 400,000 officers and 400,000 ratings by the year 2000. We still have an opportunity to redress that situation. However, as my noble friend Lord Callaghan has said, the situation is critical. I believe the word "critical" was a moderate word to use in this situation.

We need to do two things: we need to rebuild our fleet and we need to train and retrain officers and ratings. The noble Lord, Lord Sterling, spoke of the fiscal and financial measures which should be taken to rebuild the fleet. I wholly agree with the proposals that he and the General Council of British Shipping have made. But more to the point, the Commission agrees with those proposals, as Mr. Erdmenger made clear in his evidence to the committee. I hope that the Minister will not even be tempted to deliver yet another lecture on the theoretical advantages of free competition. I address his attention to Mr. Erdmenger's words when he said: Ideally, it is true, the best situation would be not to have world wide any subsidy to the shipping industry, but we are not there yet". It is dangerous to put our heads in the sand. It is suicidal to put our heads under water and keep them there.

Reference has been made in the report and in the debate to comparative labour costs. One of the main reasons given for flagging out—which has been hinted at this afternoon—is that it reduces labour costs. The unions, NUMAST in particular, have constantly emphasised that labour costs are not just a matter of wages. On the one hand, to say that they are ignores the side of the equation relating to the effective use of manpower. We have seen enormous improvements in productivity. However, I emphasise that the really big gains from new technology come from the new ships. But we are not replacing our ships; the average age of our fleet is 13 years old. That is well above the rest of Europe.

On the other hand, as the unions have consistently argued, it is essential to look at the whole range of what the Commission calls employment costs, not just wages. Here I found a notable ally—none other than Sir Frederick Bolton, the president of the UK Centre for Maritime Policy Studies and formerly president of the General Council of British Shipping, who said in reply to question 75 (on page 20 of the report): When we talk about cost competitiveness in terms of wage costs we are not nearly so worried about the actual amount of wages that are paid to our own or European seafarers vis-à-vis the rest of the world as we are with the total package including the fiscal aspects … If we could eliminate the fiscal disadvantages we could live with the pure wage cost disadvantages". The Government have acknowledged in principle the need for special tax treatment of British seafarers, and I welcome that. The report documents admirably the way in which British seafarers, and therefore the merchant fleet, are still disadvantaged. My noble friend Lord Callaghan made an unanswerable case for removing income tax and national insurance liabilities for each night spent on board ship. As he said, that would cut 25 per cent. off the employment bill at a relatively small cost to the Exchequer.

I echo also what my noble friend said about the community charge. I share his surprise and horror at the court decision today in relation to relief for seafarers from the community charge. I urge the Government to introduce relief for periods of three months and more spent outside the UK.

Such measures would help indirectly to stop the haemorrhage of manpower. We also need direct action on crewing requirements. I fear that the committee is less than wholehearted in its approach to the crewing of Community vessels by Community nationals, which is the Commission's aim. The noble and learned Lord, Lord Oliver, referred to the Commission's objective for the crewing of Community vessels under which all officers and at least 50 per cent. of the crew should be Community nationals. The report throws doubt on that objective. That may take some time to achieve, but why do we not set it as our objective and establish a timetable to achieve it? We should set it co-operatively between Community countries as distinct from linking it to EUROS.

On that question I suspect that I part company with the noble Lord, Lord Sterling, who in the joint working party report to which he referred seemed to argue for the removal of all nationality requirements for officers. The current requirements can by no means be regarded as satisfactory. At present a ship has to carry only a master, a chief officer and chief engineer who are British nationals. It is not merely a question of their being British; if they are of any Commonwealth nationality they meet the requirement. That places an enormous strain on the master of the ship which is in addition to those imposed by the Merchant Shipping Act, and it also makes no provision for the proper training of junior officers who are tomorrow's masters.

There is a strong case for the establishment of the objective to which I referred. That is related to language requirements, to which many references have been made this afternoon. Here the committee might have been more positive in its recommendations. The need was clear even before the "Scandinavian Star" incident. There should be a language test. That should not apply merely to passenger vessels; it should apply to all vessels. It should be enforced by port state control.

In conclusion, I believe that the committee is absolutely right to oppose making the improvements dependent on the establishment of EUROS. I would not necessarily rule out action in the long run to establish a Community register, but one very compelling argument against it in the present circumstances is that it would almost certainly delay action which is manifestly needed most urgently now. I join others in urging the Government to recognise that and to take action in the Budget and by other means to give merchant navy officers and ratings confidence that the British shipping industry has a future.

6.17 p.m.

Lord Clinton-Davis

My Lords, I join with others in congratulating the noble and learned Lord, Lord Oliver, and members of his Select Committee on a work of remarkable analysis of the Commission's proposals and for their observations on the British scene.

I also join other noble Lords in congratulating the noble Lord, Lord Sterling, on a remarkable maiden speech and also for bringing to this House his great expertise. He speaks from a pivotal and authoritative position as president of the GCBS and chairman of P&O. As president of the GCBS he has taken a lead which, as the noble Lord, Lord Greenway, said, ought to have been taken by others long ago.

All of the speeches that have been made in this debate have been backed by considerable expertise in the field of shipping. I was particularly encouraged by the speech of my noble friend Lord Callaghan, in whose government I was very privileged to serve. It was refreshing to hear him eschew so publicly the phrase "a level playing field" which seems to mark every speech about the internal market these days.

In the report Challenges and Opportunities shipping was described as a vital national asset. It is tragic that it has taken this Government more than 11 years to recognise that fact—apart from the palliatives applied in the 1988 Act. In that time it has presided over the most dramatic decline in the merchant fleet. But as a number of noble Lords said, merchant shipping is also a significant European Community asset, critical in terms of the Community's overall transport policy. It is a major international activity which the largest trading bloc in the world ignores or fails to nourish at its peril.

Dependence on others to transport our cargoes and our people, about which regrettably shippers—my noble friend Lord Murray adverted to this point—seem to be wholly unconcerned provided that they can procure the lowest prices regardless of how they are achieved, would be an extremely dangerous situation for the 320 million people of the Community. We need a fleet to serve those people. We need to have a voice in international shipping affairs, to exemplify high standards of seafaring and safety and to show respect for the maritime environment. Not least we need an effective merchant fleet for our defence strategy. The noble Lord, Lord Callaghan, adverted to that point, as indeed I have done on many previous occasions.

Whatever excuses the Government may now offer, the relatively impoverished contribution that we are able to make in terms of merchant shipping in the current Gulf crisis is eloquent testimony to the failure that has occurred in merchant shipping. Whatever criticisms there may be of the Commission's communication to the council and the draft regulations which were annexed, the overriding purpose of the Commission has been: to maintain and develop an efficient and competitive shipping industry and to secure competitive sea transport services in the interests of Community trade". I was Commissioner for Transport in the previous Commission and, together with my services, I was largely responsible at least for the analysis of the current document and for some of the positive proposals. In that analysis the Commission described the dramatic decline of the fleet since 1980. It set out the causes of the decline and attributed it to lower taxation, lower social security and lower wage costs which, together with a rather more permissive attitude about international regulations, have been the prime attractions of flagging out. The analysis describes the serious reduction in employment of European Community seafarers, the ageing of the fleet—the British fleet has appeared to be the most vulnerable of all to that process - and many other factors which have led to the decline. The Commission highlighted the national measures that have been taken to try to remedy the position which equally have distorted competition between member states.

So the real question that we are addressing today about the Commission's communication and its proposals is how effective are the solutions likely to be. I turn immediately therefore to the question of EUROS—the European Community ship register and flag. I must plead guilty to having advanced the concept while I was a member of the Commission. I still believe, as does my noble friend Lord Murray, that it is an idea which needs to be developed, despite the strictures contained in the Select Committee's report. For EUROS to succeed it has to be attractive to ship owners and at least as attractive as flagging out. Patently that is not the case at present. But on the assumption that it can be further developed, so as to provide real incentives for its use, it could be a means whereby national measures could converge so as to avoid harmful distortions of competition. It could be a useful administrative expedient to control certain facilities attached to the register. It could be a benchmark for defining new objectives for European Community shipping policy, including the availability, training and competence of European Community seafarers.

Those were the kind of aims which I had very much in mind when I launched the idea in London some three or four years ago. But, as I indicated when I made that speech, massive political and legal complexities undoubtedly stood in the way of advancing the idea with any hope of speedy implementation. What I sought to do at the time was to initiate a debate about what is clearly an important issue for the future of European shipping.

In my own draft communication to my colleagues in the Commission on the positive measures, which regrettably was not adopted by the Commission in 1988, I deliberately refused to link the concept of EUROS to the positive measures for four compelling reasons. First, I thought that the concept required further elaboration and that efforts were needed to be able to persuade member states about the principles involved before embarking on the specifics. Secondly, the fact remained that at that time, and even up to the present, the legal and political complexities had not been sufficiently resolved. Thirdly, I concluded that it was therefore premature to introduce legislative proposals to that effect. Fourthly, I decided that to attempt to do so would inevitably distract attention from the urgency of the need to introduce positive measures to deal with Europe's waning fleets. Therefore, I make no apology for having done what I did in relation to that document. I believed that it was important that it should have bruited afresh the idea of EUROS so that it could be seen, so to speak, in Green Paper or even White Paper terms.

Like the Select Committee I believe that advancing the cause of EUROS at this stage has tended to deflect attention from more urgent problems. Consequently, I think it is vital that we should focus on the positive measures proposed, detaching them from the EUROS concept for the time being. We can concentrate on that once the immediate crisis has passed. I certainly do not accept the idea that the concept of a European flag has been discredited.

Before I move on to the specific recommendations of the Select Committee, I want to refer to one comment made in paragraph 89 of the report. I believe that it is profoundly wrong—it has been repeated this evening—to assert that the European ship register has ever been or should be perceived as a flag of convenience. I agree with the Select Committee when it concludes generally that flags of convenience have been and in general terms at least are inimical to the interests of the exercise of proper responsibilities on the part of a state for the safety of its ships and those who sail in them.

It is true that when some flags of convenience have tended to become more responsible, such as the Liberian flag, they have become inversely less attractive to ship owners. The fact is that the mischief of flags of convenience has been compounded over the years by collusion between ship owners, shippers and indeed governments. It is one thing to say, in my view correctly, that the benefits of EUROS have not been sufficiently demonstrated to encourage ship owners to choose that option compared with others which might be open to them; it is quite another thing to assert, mistakenly in my view, that EUROS is a flag of convenience.

I make that remark with particular regard to the observations of the noble Lord, Lord Greenway, and the noble and learned Lord, Lord Oliver, for the following reasons. First, registration in EUROS would not affect the legal responsibility of the flag state towards the vessel or the responsibility for the enforcement of international standards and rules. Secondly, where national requirements —for example, those relating to European Community nationality of the crews—are more stringent than those specified in the EUROS regulation, they will continue to apply. Thirdly, I reject proposals such as those contained in the report by the rapporteur to the European Parliament, Mr. Sarlis, to accept lower safety standards for seafarers on non-passenger ships than are considered necessary for passenger ships. That is profoundly wrong. Nor am I happy about the possibilities which may excuse the employment of sub-standard "crews of convenience" receiving cut price wages and being generally exploited. I want to assure the House that if EUROS had begun to resemble a flag of convenience I should never have advanced it as a viable proposition.

Paragraph 89 asserts that deep sea shipping transport is international business. It goes on to say that it is not susceptible to control by European Community rules or to the erection of barriers to exclude outside competition. With very great respect, that is belied by the evidence. The evidence is that the package of measures agreed in December 1986 was adopted by all 12 member states. Those measures received parliamentary approval some time ago.

Regulation 4056/86, which deals with unfair competition—the dumping of freight rates—has been successfully invoked in the European Court of Justice in the Hyundai case. The regulation was aimed at, and in my view would also catch, low safety standards and state subsidies. That was the nature of the discussion that I had in the Commission at the time. I submit that those facts refute the assertion that paragraph 89 contains.

I turn to the other recommendations. I shall comment only on those where I have certain reservations or disagreements. Otherwise it may be accepted that I agree with them. On paragraph 91, I understand that discussions on facilitating transfers of ships between registries are now close to agreement in the council—a point likely to be included at the next council. Paragraph 92 relates to the harmonisation of seafarers' qualifications. That is certainly a matter to be encouraged providing that we do not accept it as a basis for agreeing the lowest common denominator. The essential criteria should be high standards and best practice.

On paragraph 93, with regard to food aid, the Select Committee considers that, the most economically advantageous tender should in general be selected". That is fine if we talk about fair competition between European Community member state shipping. However, if we consider the issue more broadly to include unfair competition from flags of convenience and others, then it flies in the face of the Select Committee's own recommendations elsewhere. It is often utterly impossible for the flags of European member states to submit lower tenders against low-cost, low-standard, or state subsidised flags. Such regimes should not be supported since that would, to use the Select Committee's own language, compound the mischief of flags of convenience", and, one might also add, state subsidised shipping.

The issue of cabotage is referred to in paragraph 94. It is a matter about which my noble friend Lord Callaghan spoke eloquently and with great justification. I believe that the conclusions reached by the Select Committee are right. Current restrictions, subject to qualifications about matters such as public service obligations, in relation to island services, and the qualifications referred to by the noble Lord, Lord Greenway, clearly conflict with the provisions of the Treaty of Rome. They should be ended. The Commission has tried mightily to end them. But member states have stood in the way, obstructing the purpose. When will the Government stop simply threatening action and posturing about it and do something, perhaps, as the working party suggested, by invoking a test case, or helping a test case to be invoked before the European Court of Justice if substantive progress is not achieved very shortly. The argument has continued for years. It is a threat to the completion of the internal market.

On paragraph 95, I welcome the views expressed about the Commission's principal criteria for the assessment of state aids and support for the costs of training seafarers and the need for such policies to apply more broadly than at present in the United Kingdom. However, I am not convinced that the adoption of maritime and fiscal measures which have been urged by the European Parliament are necessarily outside the terms of the treaty.

In paragraph 97, the Select Committee concluded that European Community vessels should, as far as possible be crewed by European Community nationals". I wholeheartedly agree with that proposition. However, one has to be careful about multinational crewing on safety grounds. I strongly support the assertion of the need for common language requirements to be examined urgently by maritime authorities for safety reasons. That was a point made by the noble Lord, Lord McGregor. There could be no more vivid example than the tragedy of the "Scandinavian Star" disaster in which no less than 160 seafarers perished in April 1990. The vessel sailed under the Bahamian flag. Eighty per cent. of the crew had joined only the week before. The Danish court of inquiry was informed that there were enormous difficulties of communication between Norwegian officers and the Portuguese crew. Quite apart from that, it appears that the alarm system had not been tested. There had been no fire drills; and five out of the 15 fire doors had been closed. That is a devastating example not only of lack of communication but of the dangers associated with ineffective registers.

How does all that square with the Select Committee's endorsement of the argument adduced by the ship owners that they, should be able to adopt arrangements which are competitive in the markets where they are operating"? It is the same free market philosophy which has contributed so much to the employment of sub-standard crews of convenience.

The employment of European Community nationals can best be promoted by constructing advanced ships requiring skilful operation. That proposition tacitly supports the view that higher standards of seafaring are deployed in ships flying under most European Community flags including the British flag. It goes a long way towards contradicting the contentions of the ship owners.

Port state control should never be regarded as a substitute for flag state control. The two should be regarded as complementary. I was most interested to hear the proposition put forward by the noble Lord, Lord Greenway, on the role of insurance. Too often, governments have complacently accepted the adequacy of existing port state control. I readily agree that it has been a significant defence against sub-standard ships.

However, there are disturbing matters which need to be tackled. The target of inspection of 25 per cent. of foreign ships visiting Community ports has not been achieved in all ports. I have never been satisfied that the inspections are always comparable. It is inimical to the system if there is a substantial variation of standards—if one therefore encourages "ports of convenience". It is important for port surveyors to inspect ships, safety apparatus and so on. But what about the provisions of ILO Convention 147 which deals with conditions on board and proper certification, and the point made by the noble Lord, Lord McGregor, about language? We are often told that surveyors have insufficient expertise. Is that still the position? If so, when will it be remedied? Those matters are critical to safety.

The Select Committee expressed concern at the decline in the number of ships inspected by the department. How are the Government responding to that criticism? What is the present situation? I understand that there has been some improvement. How will more inspectors be recruited? Is it right that "small ships in small ports" are avoiding supervision? What about ferries?

In paragraph 99 the committee asserts that a definition of a European Community ship owner is not required. I caution the need to be able to exclude dubious "brass plates" shipping companies. Therefore, a suitable definition is required. I believe that that would present no problems for bona fide companies which are owned overseas.

In concluding my remarks on the Select Committee report, perhaps I may repeat that we do not have time to await the conclusion of a long, complex debate about EUROS. It makes sense therefore to detach that, at least for the time being, from the other proposals for positive measures which are certainly needed if the European Community is to have fleets worthy of its name.

Perhaps I may say a few words about the United Kingdom scene, and "challenges and opportunities". I believe that while it was good to have a joint working party report, it is a pity that it was confined to government and the General Council of British Shipping. There are others with enormous expertise not confined to domestic issues such as training. I refer to the seafaring unions, NUMAST and the NUS, as well as individuals who might have been recruited to present an objective view.

It is noteworthy, perhaps even sinister, that the Treasury opted only for observer status. Presumably the recommendations are supported by the Department of Transport but where stands the Treasury? That is the key question. The report stated that shipping was a vital national asset; and so it is. But against the backcloth of this Government having presided over a catastrophic decline in British shipping one has to ask whether this is mere windy rhetoric, complacency, or a sudden revelation of the truth. Why has it taken so long for the Department of Transport to reach this conclusion? Again, does the Treasury concur?

A number of noble Lords have rehearsed the facts of the appalling decline and I need not go over them. The decline also affects and will continue to affect the contribution that shipping makes to the balance of payments and the financial services attributable to the City of London. Together they are worth about £5 billion a year in invisible earnings.

My noble friend Lord Murray referred to the ageing of the fleet. He pointed out that 30 per cent. is more than 15 years old and that the average British ship is 13.7 years old compared with the world average of 12.7 years. Those facts were eloquently rehearsed by the noble Lord, Lord Sterling, in his maiden speech. Against those facts how can the report reasonably conclude that the industry is lean and fit? It would be more accurate to say "malnourished and geriatric". To engage in such language is to invite a complacent approach. It is grotesquely misleading and ought not to have appeared.

Moreover, the report takes a view that, despite the fact that shipping worldwide is emerging from its deep recession, Britain will find it immensely difficult to respond due to the shortage of seafarers and the failure to attract new investment so as to modernise the fleet and take advantage of the benefits of newer, more efficient, more technically advanced ships which are also more competitive.

I pay tribute to the noble Lord, Lord Sterling, for having encouraged the Minister at least to undertake a joint session with him. Some valuable suggestions were made. The noble Lord and others have stated them. However, I am worried about the phrase "more flexibility" as regards recruitment rules. I fear that it may mean lower standards and the avoidance of the measures about which so many noble Lords have spoken today especially in relation to safety standards, and for the recruitment and training of British crews.

My main criticism of the report is that it avoids the real measures that are needed to reverse this decade of decline. They are the kind of measures which my noble friend Lord Callaghan and other noble Lords, in addition to the GCBS and the unions, have markedly emphasised. They include training provision for seafarers as well as for officers; the reinstatement of 100 per cent. ship allowance for five years to act as a real incentive for investment, particularly in new but also in good second-hand ships; the removal of income tax and national insurance liabilities for British seafarers; and the issue of the poll tax which has absurdly come to the fore of our considerations today as a result of the judgment. It was right that Mr. Anderton should have taken his case to the courts; the trouble was the decision. That is a matter that the Government can correct and I hope that they will take urgent steps to deal with it in their so-called poll tax review.

I suspect that the Department of Transport will wish to see such changes made. The question is: how strongly is the department prepared to press those matters with the Treasury where the power for improvement truly lies?

6.44 p.m

Lord Brabazon of Tara

My Lords, we have had an interesting and wide-ranging debate this afternoon. I wish to thank your Lordships' Select Committee, and in particular the chairman of the sub-committee on law and institutions, the noble and learned Lord, Lord Oliver of Aylmerton. It has produced a clear and detailed report on Community shipping measures and has given us the opportunity to debate the subject today. I, too, join other noble Lords in welcoming my noble friend Lord Sterling to this House. I congratulate him on his contribution to this afternoon's debate. We are particularly fortunate to have him with us today, given his close involvement in the issues currently before us. Not only is he the chairman of one of the world's leading shipping lines but he is also president of the General Council of British Shipping and joint chairman, with my right honourable friend, the then Secretary of State for Transport, of the joint working party on British shipping.

The committee's report thoroughly examines the Commission's proposals for the second stage of Community shipping policy. The committee's analysis of the issues, its conclusions and the extensive evidence which it heard from interested parties will prove very useful to the Government in the negotiations to come in Brussels.

I shall first deal with the subject of EUROS. The Government entirely agree with the views expressed by the committee on the Commission's package. While the Commission has put forward a number of useful proposals we do not consider it at all helpful or useful to seek to bind the whole package together with the creation of a Community ship register—EUROS. The committee sum this up very well when it describes a single Community flag as a "distraction from the real problems". We are concerned that EUROS would not meet the Commission's objectives of improving the competitiveness of EC fleets and harmonising operating conditions. The proposed manning conditions would in fact increase the cost of running ships and reduce operational flexibility. In addition, any measures that the Community can devise to help its shipping industry should apply to all EC shipping and not just to vessels registered on EUROS. I welcome the preparedness of the noble Lord, Lord Clinton-Davis, to see elements of the positive measures package pursued independently of EUROS.

The majority of member states share our concerns about EUROS. In fact, some benefits originally intended to be limited to EUROS have already been broadened to cover all EC-registered vessels: Ministers agreed last December to the text of a regulation facilitating the transfer of vessels from one EC register to another, although the Commission had originally proposed that this benefit should be limited to vessels on EUROS. The council has also asked the Commission to produce proposals which provide for the mutual recognition of seafarers' certificates on all EC-registered vessels rather than confining this benefit to EUROS.

The committee in its report also comments on the European Parliament's proposed amendments to the Commission's proposal for EUROS. The Government agree with the committee that the European Parliament's proposal for a special taxation regime for EUROS-registered vessels does raise serious competence problems. It would also raise substantial practical problems. The proposal as it stands would allow ship owners to opt for the national taxation regime or the special EUROS tax based on age, tonnage and trade of vessel. This would lead to a highly complicated taxation regime for shipping which would be difficult to enforce, especially in relation to those companies where shipping forms only one part of their business.

The Commission has not yet indicated whether or not it is likely to accept these proposed amendments. We would prefer the commission to concentrate its efforts instead on the reduction of state aids to shipping in order to ensure that the UK fleet is operating in a fair competitive framework. Like the committee, the Government welcome the general principles outlined by the Commission in its paper on state aids to shipping. We would like to see the Commission building on this basis so that all member states' state aids to shipping are made transparent and open to careful scrutiny. Any attempt to justify state aids granted to vessels on EUROS must undermine this process.

I now turn to the subject of cabotage. We are also concerned that the proposal for a Community ship register is delaying progress in other areas which the Government consider to be of the highest priority. The Government are firmly committed to opening to free and fair competition the restricted cabotage trades of the Mediterranean member states. The UK coast is open to vessels in all trades regardless of flag.

UK vessels should have the same opportunities throughout the Community. The Commission's proposed draft council regulation liberalising cabotage is hedged around with restrictions including the requirement for vessels in cabotage trades to be registered on EUROS.

The UK has been pressing for progress for many years and we are beginning to see the light at the end of the tunnel. The date for completion of the single market is drawing ever nearer and there is now a greater will to reach agreement. I hope that the prospects are much better than the noble Lord, Lord Callaghan, fears. My right honourable friend the Secretary of State for Transport, reported useful progress from last December's transport council. The majority of Ministers were able to agree on the principle of a two stage approach to liberalisation with the first stage to be completed during 1993 and leaving the sensitive issue of island services, to which the noble Lord, Lord Greenway, referred, to the second stage.

The prospects for making progress by negotiation are considerably improved following the December transport council but we have not lost sight of the power which we have under the Merchant Shipping Act 1988 to introduce a test of establishment for vessels trading in UK coastal waters or the offshore trades. However, we would rather not retreat into this sort of defensive measure unless absolutely necessary. The noble Lord, Lord Clinton-Davis, also raised the possibility of the Government mounting a test case to the European Court of Justice. That is certainly an option which we shall continue to keep in the forefront of our minds.

We hope therefore that the second stage of Community shipping policy will provide new opportunities in Community cabotage trades and a fairer financial framework for Community shipping. We also want to see a fair competitive framework for Community shipping. The special position of shipping conferences has already been recognised in Community legislation, but we agree with the committee that the position of consortia and multi-modal services should be clarified urgently. The Commission has produced a general proposal for a block exemption from the competition rules for shipping consortia and we are concerned that the conditions to be attached to such a block exemption should strike a fair balance between the interests of shippers and ship owners.

On safety issues and port state control, the Government agree with the committee's support for the Commission's recommendation on improving the effectiveness of port state control within the Community. The committee recommends that the Government should restore its high level of port state inspection. The UK has, of course, consistently exceeded the recommended target of 25 per cent. of inspections. However, I say to the noble and learned Lord, Lord Oliver, and the noble Lord, Lord Clinton-Davis, that we recognise the need for port state control inspections to cover small ships in remote ports.

While the percentage of inspections varies from year to year, I am pleased to be able to inform the House that the figure for last year, which post dates the committee's report, shows an increase in the inspection rate to 34.4 per cent. However, there has been a change in emphasis over the past three years with more attention given to the quality and thoroughness of inspections rather than quantity. That new emphasis has led to an increase in the number of foreign ships detained in recent years as a result of the inspections. I was disturbed when the noble Lord, Lord Callaghan, said that he believed that Norway had far stricter inspections than we do. I hope that that is not the case and that I can confirm that to him.

Lord Callaghan of Cardiff

My Lords, I am sure that we are all very glad to hear that the number as well as the depth of inspections has increased. However, I hope that the noble Lord will not overlook the fact that although the number varies from year to year, the figure used to be around 40 per cent. or even greater. Therefore, there is still some way to go before we get back to the point at which we used to be and, in order to do so, we shall probably need more inspectors.

Lord Brabazon of Tara

My Lords, a moment ago I referred to the need for inspections of small ships in remote ports which is very important. Of course, that takes one inspector a lot longer than it would to inspect a number of ships in a large port. Therefore, it is important that that should be covered even though it may use extra resources.

It is true to say that, as the noble Lord, Lord Greenway, said, some member states have difficulty in reaching the 25 per cent. inspection rate let alone matching our figures which are, as I say, among the best.

The committee urged member states and the International Maritime Organisation (IMO) to examine whether common language requirements for crew members are adequate for safety. Along with the noble Lords, Lord McGregor of Durris and Lord Clinton-Davis, I agree that this is a vitally important issue. The IMO has already developed a standard marine navigational vocabulary to standardise the language used for communication at sea and is now looking further at the question of common language proficiency. As part of this process, the UK has submitted proposals for the development of a bilingual approach to safety training. This and other related issues are being considered by the IMO but it will of course take time to reach international agreement.

I hope that I have covered the Government's main objectives for Community shipping policy. Many of the Commission's proposals are constructive and worthwhile but we share the committee's view that these elements should be pursued separately from the proposal for a Community ship register.

I would like to assure noble Lords that the Government share their desire to see a strong, competitive British shipping industry. We will continue to work to that goal both in the Community and in our domestic policy. My noble friend Lord Sterling has already referred to the conclusions reached by the joint working party which he chaired jointly with my right honourable friend, the then Secretary of State for Transport. We are pressing ahead with the recommendations in this report in order to encourage investment in the Brtitish flag so that it is well placed to take the opportunities available to it and to win profitable business.

A number of noble Lords, notably the noble Lords, Lord Callaghan, Lord Greenway and Lord Murray, referred to the need for British crews. We recognised the importance of training British seafarers, both officers and ratings. The industry has made a commitment to identifying its future recruitment needs and is taking action to ensure that those are met. The measures introduced under the Merchant Shipping Act 1988 have proved successful. As the noble Lord, Lord Murray, said, the scheme came into operation only in 1988. The intake for 1987 was as low as 162. The noble Lord will be pleased to know that since the scheme became operational, 1,238 officers have started training and the figure by the end of this financial year is expected to be more than 500.

The other measure brought in with that Act to assist industry with crew relief costs has also proved successful, is working well and 48 companies are now taking part.

The noble Lord, Lord Callaghan, wondered why the working party did not include strategic requirements within its remit. Work on that has been taken forward separately. I assure the noble Lord that that work is now nearly complete.

I believe that all noble Lords and in particular the noble Lord, Lord Callaghan, asked about financial aid, fiscal measures and tax relief for the industry. Those are matters for my right honourable friend the Chancellor and were deliberately excluded from the working party's remit for that reason. As the noble Lord, Lord Callaghan said, the Budget is nearly upon us. He will know better than I that I should not wish to comment on what may or may not be in my right honourable friend's Budget Statement even if I knew, which I do not. My noble friend Lord Sterling, on behalf of the GCBS, and other maritime organisations have made budget submissions to my right honourable friend and we must wait to see what they bring about.

I only add that they will have been armed with a copy of the joint working party's report which in its very first sentence describes British shipping as a vital national asset. I cannot say more than that on that subject. Noble Lords must be patient for only a short while now.

I conclude by welcoming the committee's report on Community shipping measures and the full and interesting debate which we have had on the issue this afternoon.

Lord Oliver of Aylmerton

My Lords, we have had what I hope is a useful, informative and at any rate to me an enjoyable debate, and I do not wish in winding up to detain the House for very long. I begin by apologising to the noble Lord, Lord Callaghan, whose speech I listened to with great pleasure, for use of the expression "a level playing field" in the maritime context. Perhaps I may excuse it by adverting to the difficulty of finding any other suitable metaphor. The sea, in my experience, is seldom level, and it is of course a fact of life that water does not flow up hill.

The general welcome accorded to the report and the criticisms made by the noble Lords, Lord Murray and Lord Clinton-Davis, are a great encouragement to those of us who worked on the preparation of the report. It is an encouragement to us to find that, despite the persuasive speech of the noble Lord, Lord Clinton-Davis, the Minister shares our view that EUROS is no more than the fifth wheel of the coach.

On the response generally I would just say that the Minister referred to the difficulties inherent in the Commission's proposals for a special fiscal regime. This is a view that coincides with that of the committee. I hope, however, that speaking as I do from the Cross-Benches I shall not be thought to be carping if I say that one might feel a little disappointed at the absence of any concrete fiscal proposals for halting the decline of the shipping industry, or at least an assurance that they are under active consideration, although for the reasons given we readily understand the reason for the Minister's reticence in this regard.

I have deliberately left until last adding to those of the other speakers my own congratulations to the noble Lord, Lord Sterling, on his penetrating informative and to me moving maiden speech. It was indeed a pleasure to listen to him. It was less pleasurable to hear what he had to say from his unique experience. On the down side we have had a depressing picture of the competitive disadvantages from which British ship owners suffer—an ageing fleet which is being replaced at the lowest rate in Europe. On the up side we have the assurance that the British merchant fleet is efficient, well managed and able, if only the support is forthcoming, to take advantage of the opportunities which will occur with an upturn in world trade.

But what is clear, not only from what the noble Lord told us but from everything that has been said in this debate, is that we as a nation are in danger. We are losing ships, we are losing seafarers and we are losing shipbuilding capacity. There is an urgent need to look at fiscal measures. There is an urgent need to look at the training and, as important, the retaining of officers and seamen. There is an urgent need for measures to halt the decline of shipbuilding. If nothing is done, the United Kingdom is in danger of losing not only a vital financial and strategic asset but a skilled working force both of seafarers and shipbuilders. It would be a pity if the industry became reduced to a number of small, no doubt highly efficient and skilled, yards building small vessels for sport or pleasure.

In conclusion, may I draw from another Oliver. I would just paraphrase Oliver Goldsmith's lines from The Deserted Village: Princes and lords may flourish, or may fade, A breath can make them, as a breath has made; But a bold merchant fleet, its country's pride, When once destroyed, can never be supplied". On Question, Motion agreed to.