UK Ships: Flagging Out (Hansard, 22 May 1991)

§ Lord Brabazon of Tara
My Lords, from January to April 1991, 19 trading vessels have left the United Kingdom register. Of those, four have gone to other British registers. In the same period, 13 vessels have come on to the register. I understand that Cunard, Blue Star and P&O Containers are currently flagging out a total of five vessels and that P&O has announced that it is considering further moves. These are commercial decisions. It is too early to say what the effect of such action would be on the crews of the vessels involved.

§ Lord Clinton-Davis
My Lords, when the Minister refers to them being commercial decisions, is he not aware that P&O and indeed others have attributed their decisions directly to the fact that no fiscal help whatever has been forthcoming from the Government to meet their pleas for a restructuring of a very old British fleet? Is he further aware that the Government's response in the Budget in particular has been rather like throwing a drowning man both ends of a rope? When will the Government do something to assist this vital British industry upon which our country significantly depends?

§ Lord Brabazon of Tara
My Lords, so far as concerns fiscal measures, my right honourable friend the Chancellor explained in the Budget Statement that there is a limit to the extent to which the tax regime can be manipulated to meet the specific needs of individual industries. He did, however, reduce corporation tax from 35 per cent. to 33 per cent., which makes it, with Luxembourg, the lowest level in the European Community and among the G7 countries. That will benefit shipping as well as other industries. Shipping also benefits from the 25 per cent. depreciation allowance. A vessel with a life of 15 to 20 years can be written down in just eight. In recognition of the strategic value of British seafarers, the Chancellor also announced an extension to the arrangements under which seafarers can in some circumstances be exempt from United Kingdom tax on foreign earnings.

§ Lord Dean of Beswick
My Lords, is it not correct that recent reports in the press have indicated that British shipowners operate at a disadvantage as against other shipowners in the world, especially in 241 Europe? British shipowners should not operate at a disadvantage as against their competitors. What will the Government do to protect this valuable asset which may, if we are not careful, disappear altogether?

§ Lord Brabazon of Tara
My Lords, the noble Lord referred to Europe. We are working hard in Europe to encourage the reduction of subsidies. We believe that subsidies distort the economic decisions and are not the way to encourage a healthy and competitive industry. We are pressing the European Commission to apply to shipping the state aids provisions of the Treaty of Rome.

§ Lord Boyd-Carpenter
My Lords, from the defence point of view, do the Government feel any anxiety about the running down of the British Merchant Navy, which in certain foreseeable situations might be of considerable defence importance?

§ Lord Brabazon of Tara
My Lords, of course we recognise the contribution that the Merchant Navy makes in times of crisis. Indeed, we monitor the fleet and manning levels accordingly. For that reason, we introduced relatively recently two measures of assistance to the merchant fleet. One of them, which has been most successful, concerned the training of officers and the other involved help towards crew relief costs.

§ Lord Murray of Epping Forest
My Lords, in order to try to put some flesh on the balance of that particular answer, can the Minister inform us, in terms of either the number of ships which are UK-owned and registered, the gross registered tonnage under the Red Ensign fleet, or the total number of British seafarers and officers—or any combination of those factors—at what point the Government's anxiety about flagging out will take the shape of positive action comparable to that taken by our competitors, to support the British fleet? Alternatively, are we to assume that when the last British ship has been flagged out, the Government will still show the same lack of concern that they are showing now?

§ Lord Brabazon of Tara
My Lords, I believe that my original Answer indicated that at present the situation so far as concerns flagging out is not that critical. In fact, only a small net number of vessels had left the register at the beginning of this year. We have introduced various measures of assistance to the merchant fleet over the past two or three years. I hope that they will be successful in encouraging the fleet.

§ Lord Sterling of Plaistow
My Lords, I trust that my noble friend will recall that as president of the General Council of British Shipping and chairman of P&O, I chaired jointly the working party on the shipping industry last year. Is he aware that the group's findings in its report were unanimous that British shipping was a vital national asset? Does he also remember that the report stated that it was fast accelerating towards extinction, and that it was feared that many ships would flag out if something was not done? It was also 242 found that British shipping was a necessity and had been the fourth arm of defence for about 400 years. I alone represent a fleet operating 200 ships at sea.
I believe that the number of ships that will flag out will accelerate. Does my noble friend agree that, although the Chancellor of the Exchequer stated in his Budget speech that he fully recognised the strategic need of the Red Ensign fleet, in practice he said that measures would be required to meet that need? Does he also accept that as those measures will not be forthcoming, the Government will he presiding over the demise of the Red Duster?

§ Lord Brabazon of Tara
My Lords, I acknowledge my noble friend's great experience in the matter. As he said, he was the joint chairman of the working party. Most of what my noble friend said is a matter for my right honourable friend the Chancellor of the Exchequer. The report of the working party contained five main recommendations to help the British fleet. All of those have either been acted on or will be acted on.

§ Lord Greenway
My Lords, does the Minister agree that, with an election looming in the wings, now is the time to go one step further down the road in addition to the constructive measures that the Government have already taken with regard to our merchant fleet? Will he further agree that the zero option in relation to a merchant fleet, as practised by Canada unsuccessfully some years ago, is no option at all when it comes to the Red Duster?

§ Lord Brabazon of Tara
My Lords, I very much hope that that is not an option. I agree with the noble Lord. That is why, as I said, we have introduced various measures during the past few years to encourage the merchant fleet.

§ Lord Stoddart of Swindon
My Lords, can the Minister tell the House what is the minimum tonnage under the British flag that the Government will tolerate before they take some action?

§ Lord Brabazon of Tara
My Lords, we have taken action. I cannot give the noble Lord an answer in terms of minimum tonnage.

§ Lord Clinton-Davis
My Lords, is the Minister suggesting that the situation regarding the British fleet is looking up? I suppose that we might even agree with that view: it is actually flat on its back; it has no alternative.