Merchant Navy

HL Deb 28 April 1993 vol 545 cc383-417

5.30 p.m.

Lord Greenway rose to call attention to the problems facing the Merchant Navy; and to move for Papers.

The noble Lord said: My Lords, I beg to move the Motion standing in my name. In so doing I should like to say how much I welcome the opportunity to bring to the attention of your Lordships the present state of our Merchant Navy, and to outline some of the problems affecting it. I cannot stress too strongly how vitally important it is for us—a great trading nation and still an island race despite the sometime onset of the Channel Tunnel—to see that we maintain a viable and efficient merchant fleet and thereby a strong voice in international shipping circles.

To enable the current position to be fully understood, it is necessary to go back a little into history. Thanks to the industrial revolution, we gained a head start over the rest of the world and the emergence of steam as a means of compulsion of ships, coupled with plentiful supplies of the best Welsh coal, enabled us to reinforce our dominance in both shipbuilding and shipping and so carry our manufactured goods efficiently to all corners of the world.

However, as other nations began to industrialise, so they too acquired merchant fleets and began to provide competition. Twice the German fleet became the strongest competitor; and twice, as a result of war, it was reduced to virtually nothing. The same can be said of the Japanese fleet during the last war. But both those fleets were rebuilt with great rapidity after 1950 when restrictions were lifted.

We on the allied side also suffered grievous losses which eventually had to be replaced at greatly increased cost. To tide us over in the interim, we employed many of the wartime-built standard ships which had become surplus. Eventually those and many others found their way into the hands of new and somewhat less scrupulous owners. Many of them were to be traded successfully for about 20 years, generally to the detriment of the traditional shipping nations which were beginning to be faced with greatly increased managing costs due to the increasing strength of the unions.

The position was not helped by the emergence of inefficient third world fleets nor by the rapid build up of the Soviet and Comecon merchant fleets from the early 1960s. More recently the Eastern countries have been in the ascendency, and their newly-built fleets are highly efficient and competitive. In order to combat the increasing costs, the Americans were the first to adopt flags of convenience in a big way. Flags of convenience are not new in the shipping world. They have been used for many years. Over the succeeding years more and more shipowners from other nations, including some of our own who have done so reluctantly, have been forced to follow suit in order to compete commercially and to remain in business.

Not all have survived, however. Whether it came about by their own failure to cope with changing circumstances, whether there was not enough Government intervention, or whether some simply saw the writing on the wall and got out while the going was good, the list of UK shipping companies which have now left the business of owning and running ships, is a long one. That list is still growing and will continue to grow unless something is done about it.

What then is the position today? Let me take a global view to start with. World trade is currently rising at about 4 per cent. a year and is expected to increase by at least 50 per cent. by the year 2005, subject to the current GATT problems being sorted out. With regard to world shipping—let us not forget that shipping is and always has been a truly international business—the whole world fleet is ageing. Sooner or later it will have to be replaced. Current shipyard capacity is not large enough to cope with the number of ships that will be needed.

Crewing is also becoming a very serious problem with some estimates putting the shortfall at about 750,000 by the year 2000. As the flag fleets of the more responsible nations have declined, so a lot more shipping has passed into the hands of entrepreneurial owners who make full use of dubious registries which have mushroomed as a result. They employ, often in atrocious conditions, the cheapest crews available, many of whom have little or no formal training and whose safety record is abysmal, to say the least.

Thanks to one or two recently well-publicised disasters, safety is now the buzz word with regard to shipping. Governments, international bodies, learned societies, the media and the general public are all falling over themselves to have their say. This is not a debate about safety per se and I shall touch on the subject only briefly. If my memory serves me right, the last shipping debate in this House concerned the excellent report of the noble and gallant Lord, Lord Carver. I am glad to see him in his place. His report was on shipping safety, as noble Lords will remember. I am delighted that the noble and gallant Lord will speak. I am sure that he will have some valuable comments to make.

We also have the noble and learned Lord, Lord Donaldson, looking into shipping pollution at the moment as a result of the "Braer" incident. The noble and learned Lord understands the sea. I have great faith in his ability quickly to see through some of the more bizarre schemes being put forward. I am sure that he will produce a worthwhile report which I suspect will have more than a little to say on the subject of manning standards which are crucial to the whole question.

Before leaving safety, I wish to mention the role of the IMO. A lot of people complain about the IMO, saying that it is too ponderous and has no teeth to enforce its conventions. I do not hold that view. Because of its truly international nature, shipping can only be directed by one international body such as the IMO, backed up by responsible state enforcement. The recent decision of the EC—which does not have a great record so far as concerns shipping—to put pressure on member states to ratify IMO conventions in the wake of the "Braer" incident, and the accident off Corunna, and to strengthen port state control is a mature one and a great step forward. Someone at least has learned something from the poorly thought out, knee-jerk reaction of the US in the shape of the Oil Pollution Act 1990 following the "Exxon Valdez" casualty.

I have said quite enough in the general context. I now turn to the nub of my Motion, our own Merchant Navy—"our dear Merchant Navy" as Churchill so memorably referred to it after its great contribution during the last war.

The bald fact today is that our British flagged merchant fleet—those ships which actually fly the Red Ensign—has contracted from a pre-eminent position in 1939 with a quarter of the world's shipping to a mere 33rd position today with a bare 0.5 per cent. share. To the layman that must seem like a total disaster. But if one includes British-owned ships under other flags we still own some 2 per cent. of the world shipping. That puts us in 11th position. Therefore the overall position is not quite as bad as is sometimes made out.

On top of that our directly owned fleet, lean though it may be, is both efficient and competitive. It is acknowledged to be one of the safest in the world. In P&O it includes one of the world's major container and cruise shipowners, and in Shell, the world leader in the carriage of liquefied natural gas. We are pre-eminent in ferry operations. Even today our largest ferry ever, P&O European Ferries' "Pride of Bilbao", recently acquired from a Finnish owner, is making her maiden voyage from Portsmouth to Bilbao. Blue Star Line owns the world's third largest reefer fleet. We have a modern and competitive coastal fleet and a valuable offshore support fleet.

However, where we have lost out is in the bulk and tanker sectors. Also, let us not forget the fishing fleet which, although not part of our trading fleet, is still a valuable part of the merchant marine industry. Its plight has been highlighted by recent demonstrations and, irrespective of recent legislation and conservation measures, it has fallen behind our EC neighbours in both age and competitiveness, due to lack of investment. There is a real danger that as a result of the EC's decision on the Merchant Shipping Act 1988, much of it could fall into the hands of foreign companies, to the detriment of British fishermen and their highly dependent communities.

To return to our trading fleet, we may be down and we will have to learn to live with the fact that we will never again reach the dizzy heights of the past, but we are far from being out. British shipping still contributes something over £2 billion net a year to the economy in invisible earnings—not a patch on what it used to be, but still a tidy sum and one that, with a modest investment, could be increased fairly quickly.

In addition, there is a whole range of affiliated or dependent activities that have grown up on the back of our shipping business. Only days ago, I saw that it was announced that Gearbulk, a large Norwegian company operating in specialised bulk tonnage, is moving its operational headquarters to London which is still regarded as the international centre of the shipping world. We have in the City the Baltic Exchange, the leading sale and purchase market in the world. It is also big in the charter business and is now happily back in part of its own building after the terrible bomb last year. I believe and I am happy to say that it is doing well at the moment. It is also working on plans for a new open register to attract more shipping to London.

We also have Lloyd's and the insurance market which provide more than half the world's marine insurance cover. We have the P & I Clubs, the protection and indemnity clubs, which are becoming increasingly involved in the safety argument. We also have Lloyd's Register of Shipping, arguably the best and certainly the largest classification society in the world. London is also the world leader when it comes to maritime law, with a large number of the international arbitration cases being heard here. All those activities contribute another £1.5 billion net to our balance of payments. So much depends on shipping, much depends on our own shipping and if, God forbid, we were to lose our own flag fleet, how then could we maintain our influence both at IMO and in the other shipping councils of the world?

Now, what are we going to do about it? First, fleet renewal: I have already mentioned that the world fleet is ageing. Our own fleet is no exception and on average it is about 16 years old. If one takes 20 years as the generally accepted economical working life of a ship, noble Lords can see that fleet renewal cannot be put off much longer, certainly not if we are to maximise any future benefit from increased world trade.

Just in passing, it is perhaps interesting to note that we now carry on average about 18 per cent. of our foreign trade in UK registered ships, compared with about 35 per cent. in 1980. The current figure for the US flagged ships is about the same, but South Korea carries over 50 per cent. in its own ships and Japan about 45 per cent.

Current freight rate levels which, through over-tonnaging and the current recession, have in many cases sunk to all-time lows, are simply not sufficient to enable some of our shipping companies to finance replacement tonnage. That is a problem which is common to us all and most other countries have adopted measures to support their shipping industries to the extent that, in Europe, our own fleet, which has not enjoyed similar support from the Government, is pushed from being the second cheapest flag, after Italy, to being the most expensive. That cannot be right and ways must be found to reduce our costs. If only we could do that, we could be on to a real winner.

Our Treasury-led Government are always quibbling about money, but there comes a time when they are forced to come up with something to avert disaster. For example, they managed to find £700 million the other day to help the coal industry. Our shipping industry is nowhere near disaster, but it needs sufficient help in the short term to tide it over this particular hump. I have with me a letter from one of our more enterprising shipping people who is always looking at new ideas. He says that venture capital is almost non-existent in the UK, in notable contrast to other North European sources. He goes on to say that the 3Is Shipping Finance Corporation, set up to help British shipping, is hardly used because it demands too high a level of guarantee. We all know that HMG hold the admirable ideal of bringing other countries up to our own standards, but that could take for ever and British shipping cannot wait that long. Surely it is no more than prudent husbandry to invest some money in a core industry that will ultimately benefit the future prosperity of our country. What is wrong with that?

The second thing that needs to be done is to ensure that we have an adequate supply of properly-trained seafarers in the future. That brings me to the question of education and training. With the decline in the UK-registered fleet and greater use being made of foreign crews by those flagging out, the number of UK seafarers has also declined dramatically. There are now only a third of what there were 10 years ago and the average age of our officers is something over 40. In addition, due in the main to our shipping companies no longer being able to afford to employ them, junior officers are now in short supply. As a direct result, the number of colleges specialising in training seafarers has declined from 13 to only four. One of those, Southampton, is now just a department of another college, and its continued existence is open to question. We have only some 300 new entry cadets in the present academic year, compared with about 2,500 in 1975. Studies show that we need at least 1,000 fully-trained seafarers a year to feed our marine-related professions and industries, such as the ones I have mentioned in the City and also jobs such as coastguards, harbour masters and the like.

The whole infrastructure relating to merchant navy entry is under threat. I have already mentioned the vital importance of properly trained crews in terms of safety. How then are we to continue to train officers and ratings of sufficient calibre to meet our future needs, both in terms of manning our own ships and ultimately supplying the host of marine-related industries and organisations that have always relied on that source? The question is a vexed one and there is no easy answer. For example, if we were to train more people—and evidence suggests that there are still plenty of young men and a number of young women who are keen to go to sea—we would not have enough vacancies at sea to accommodate them. That is certainly true of flagged-out ships where, in many cases, only the senior officers are British. The newly-trained UK cadets surplus to our own flag requirements would therefore have nowhere to go to get senior officer experience. So how are they to bridge the gap between cadet and senior officer?

It is a worrying situation and one of which I hope the Government will take careful stock. There must be an answer and there usually is, if one looks hard enough. An adequate supply of properly trained seafarers is imperative if our good name and safety record are to be maintained in the future. That applies just as much to British-owned shipping as it does to British-registered shipping. Besides which, British officers have traditionally always been sought after for their experience by other flags.

I wish briefly to mention the defence aspect. It is no secret that for a long time our senior officers have been greatly concerned about the decline of our merchant fleet. Levels have now fallen below those required to support the overseas deployment of troops in any great number and we could no longer mount a Falklands-type campaign. The Government take the view that commercial charters of foreign ships will fill any gaps, as indeed happened in the Gulf conflict. What would have been the position then if, for example, we had had some hostile foreign submarines operating in the Gulf? I think it would have been very much more difficult to find foreign ships to charter in order to carry our equipment out to the hostile area.

Any further manning shortages—manning is another problem which affects the situation—would also impact heavily on the fleet auxiliary, which is run by merchant seamen. The placing into reserve of its amphibious workhorses, the landing ships, poses a serious question as to their future availability—not through material deficiency, but because there may be no seamen left to man them when they subsequently need to be reactivated.

National emergencies are seldom foreseen and tend to catch us unawares. It is difficult to see how a policy of employing foreign shipping for military purposes accords with our national interest, especially if under certain circumstances it may rapidly become unavailable. That is another very good reason for maintaining an adequate British-owned and crewed merchant fleet.

I have tried to give an overview of the dilemma facing our Merchant Navy. What is past is past, and there is no use crying about it. We must be positive about our shipping. It is just as important as road, rail, or air, and possibly more so. We have a sound fleet base on which to build and we are still highly regarded worldwide in terms of skilled manpower. Let us all, including the Government—who have a most important role to play—take a sensible commercial decision now before it is too late to invest in the future of our Merchant Navy. Such a decision will repay us handsomely in the years to come. I look forward very much to hearing what other noble Lords have to say, and indeed what the Minister has to say. My Lords, I beg to move for Papers.

5.50 p.m.

Lord Colnbrook

My Lords, we have heard a most impressive speech from the noble Lord, Lord Greenway, in introducing the debate. We expected nothing else. We recognise his deep knowledge of the Merchant Navy, knowledge acquired over many years. We are very grateful to him for allowing us to discuss this important subject.

I speak with no such knowledge. I own no ships. I manage no shipping company. I never even served in the Merchant Navy. All my sea time—a very long time ago now—was in the Grey Funnel Line, the Royal Navy. But I have a total certainty of belief that in this country we depend on the sea. We are an island, for heaven's sake—perhaps I should say a group of islands. We are totally incapable of maintaining anything like a reasonable standard of living by turning our backs on the ocean and trying to exist on what we have here. How many times have we heard the Government urge us—any government, not just this one—to expand our trade overseas, to export more. They are quite right. But virtually all the trade that they want us to conduct goes by sea.

Of course, people do not go by sea any more. Businessmen seeking contracts, salesmen trying to find markets, even holiday-makers go by air. The goods do not—or at least precious few of them do. One can take a packet of diamonds in an aeroplane, but if one tries to export a power station to China it goes by ship, as I believe I am right in saying do over 90 per cent. of all our imports and exports.

One would have thought that it would be seen as an advantage that a high proportion of all that trade should be carried in British ships. It would help the balance of payments, would it not, if we paid British companies to do the work rather than foreign ones? It would help the employment situation if more British seamen were employed at sea rather than foreign ones. In the long run it might even help the Exchequer, which gets precious little benefit out of enterprises that are in trouble.

But the awful truth is that that does not happen. The reverse is happening. Year after year, in a steady and infinitely depressing progression, the number of ships flying the Red Ensign goes down and down. With it, the number of British seafarers goes down and down.

I am no statistician, but I believe that I am right in saying that in the past seven years the number of UK-registered ships, those flying the Red Ensign, has halved and the number of seafarers employed has very nearly halved. To my mind that is a terrifying figure.

I use the word "terrifying" advisedly. There is another aspect to the question apart from the economic one which the noble Lord, Lord Greenway, touched upon. Last summer, the Defence Minister, Mr. Hamilton, said in a letter: The importance of merchant shipping for re-inforcement in an emergency is unlikely to diminish. A healthy British merchant shipping industry is good for defence and we would prefer to have a large pool of British flagged and British crewed vessels to choose from during crisis or war". He is perfectly right. The Merchant Navy has always been the fourth arm of defence.

I remember nearly 10 years ago when I was chairman of the Select Committee for Defence in another place that we examined Ministers and officials year after year about the annual defence White Paper. We asked whether they were satisfied that the Merchant Navy was large enough to fill the role that they would need it to fill in an emergency. Year after year they said, "Yes, just about". Although we had our doubts, we had no alternative but to believe them. They were wrong, of course. Both the Falklands War and the Gulf War have shown that they were wrong.

But the situation is now worse than it was. Only two years ago our late and deeply lamented colleague, Lord Fieldhouse, said, in what I believe was the only speech he made in this House: The number of British manned ships sailing under the British flag and available for defence purposes is now at a critical level and may already be too few. We ignore this situation at our peril". If the number was too few then when the noble Lord made his point, it is for sure too low now. If what I have been told is correct, two years ago there were some 480 ships in the category that he described. Now there are only 395. That is a reduction of nearly one-fifth. That is why I used the word "terrifying".

We have to consider how that situation has come about. One thing is certain. It is not because British seamen are not able to compete. Our seamen are the finest one can find anywhere in the world. Their training is first-class. Seamanship is bred into us; we have always been good seamen. As I said before, we have had to be because we are an island race. Nor do I believe that the shipping companies are no good. Like everyone else, in recent years they have had to look to their efficiency. I seem to remember a report a while back—one subscribed to by the Government—which described them, in a phrase which I do not like but one that is in current use, as "leaner and fitter". We all know what it means. I believe that the reason is that we are not operating—I am sorry but I have to use another horrid current phrase—on a level playing field.

I know that for years the Government, in conference after conference and discussion after discussion, in every forum they could find, have tried to persuade other countries to adopt a common standard as regards subsidies (hidden or overt), taxation and imposts of all kinds, training and safety. They are quite right. I commend them for their efforts. I urge them to go on doing that and I hope very much that they will be successful. But, perhaps with the exception of safety—about which the noble and gallant Lord knows much more than I do—they are not being successful.

I do not know what other countries say at those great meetings but I know what they do. They continue to treat their merchant fleets a great deal better than we do. Some of them give subsidies. Some—many perhaps—treat them far better in taxation matters. Some do not bother about training. How else can it be that our Merchant Navy is so small while others are so large?

Let us look at what is happening. We all know about Liberia. But Cyprus has a merchant fleet that has three times as many ships as we have. Malta has twice as many ships as we have. Malta is a splendid place and I am sure that it has excellent seamen. However the situation is ridiculous. I beg the Government to do more than they are doing.

What precisely the Government should do I am not confident to advise. I think it is largely fiscal. As I said, I do not run a shipping company or serve in a merchant fleet. But there are plenty of people who do and who know what they are talking about. I know how keen the Government are about consultation. Then let them consult. By that I do not mean that they should say, "We are open to hearing what you have to say"; I mean that the Government should go to the people who are actively engaged day by day in the business and say to them, "We know there is a problem. Let us sit down together and see how we can solve it".

Let the Government listen and take action. If they do not do so, my fear is that the steady reduction in our Merchant Navy will continue. If it does, within measurable time we shall have virtually no merchant fleet at all. That would be one of the greatest tragedies that could afflict this nation.

6.2 p.m.

Lord Cooke of Islandreagh

My Lords, I am grateful to the noble Lord, Lord Greenway, for raising this subject today. He believes, as I do, that a large and prosperous UK shipping fleet is vital to the economy of this country. I wish to thank him for a most comprehensive and interesting review of the position as it applies today. Unless one has some understanding of the background to these problems, it is difficult to see how we should proceed. He has not left me with a great deal to say. I do not wish to repeat the arguments, so I shall confine my remarks to a few separate matters.

The noble Lord, Lord Greenway, spoke about the benefits which derive from our merchant marine. Those benefits need emphasising. They are quite apart from the direct benefit that we receive from our balance of trade and direct or even indirect employment. What is perhaps not fully understood is the effect that marine trained officers, both engineers and deck officers, have on different aspects of our industrial structure. For instance, engineering insurance companies employ almost entirely engineers with marine certificates to carry out industrial inspections. That is because marine training covers a broader range of skills and requirements than almost any other industry.

The noble Lord referred to the City of London and the services which lead the world in every respect. It is important that the core business for the London services will be provided by British shipowners. However, that is rapidly decreasing. Moreover, whether it is the ship brokers, Lloyd's Register or Lloyd's Insurance, throughout that complex of businesses there are marine trained people with experience who have come ashore. Such people are no longer being trained. They are no longer able to come ashore. There are not enough of them. There is a genuine concern that the City of London expertise cannot stand on its own without a substantial and prosperous British marine industry. Such a situation would be disastrous. The effect would be that the UK would virtually lose any influence that it has. It would lose the £1.5 billion net revenue received from the marine services provided by the City of London.

I believe that we have already gone too far down the road to sustain that group of industries because the officers and trained people no longer come ashore. That can be seen from the fact that in 1981 the average age of crews' officers on ships was in the range 25 to 28 years. The peak of that age profile in 10 years has gone up to age 43. That means that young men are not entering the field and therefore they cannot go ashore to feed the service industries as they would formerly have done. Unless we can build up our fleet to a higher level than 3.5 million tonnes, we shall not have the men passing through the industry.

It might be thought that, although there are only 3.5 million tonnes under the UK registry, British owned ships under other registries, which amount to about 13 million tonnes, could provide the crews and trained men. But that is not so. One reason for flagging out is to employ cheaper crews. It is interesting to note that, whereas we employ approximately 15,000 men in our own flagged ships, amounting to 3.5 million tonnes, in the flagged out ships, which amount to 10 million tonnes, we employ only 6,500 men, with a ratio of 6.5 to 1 between British seamen employed on flagged out ships and our UK flagged ships.

My next theme is freight rates and safety, which are linked. No shipper anywhere in the world is making large profits, for the simple reason that the freight rates have been very low for about 10 years now. Last year the freight rates for both dry and wet cargoes were at a level which only just covered the direct operating costs for ships. That means that a new ship could not recover any depreciation or management administration costs. The levels of last year would need to rise between two and three times before they would support the costs of a new ship. That is an appalling situation.

There are many reasons for that. For instance, there has been a substantial decline in the Japanese economy in recent years. But probably the most important single reason is that it has been possible to operate old, inefficient and unsafe ships. The scrap price for steel has been very low. It has been possible for tenth level—not even third level —operators to buy up wrecked ships, man them in a kind of way and operate them at a profit. If the ship should sink after two or three voyages, that suits them quite well. It is worth pointing out that 44 large ships, tankers or bulk carriers have sunk in the past three years with the loss of 300 lives. That kind of statistic does not appear to be published.

We are allowing ships of that type to trade into our ports. Why do we do it? We do not seem to bother. I suggest that the UK should use its utmost endeavours to ensure that the IMO regulations for safe ship operation are pushed forward as quickly as possible. In February of this year the EC issued a draft directive which goes some way in that direction. But it needs urgent action, not only for safety but also, if the ships can be banned from all European ports, the rates would rise and that would help the whole shipping world.

There are obviously all sorts of measures that can be taken to improve the situation for British operators. But in the first instance it is up to the Government to take some pump-priming action to help the shipowners. One such action must be to permit free depreciation so that they can write off the ships whenever they have marginal profits. There are many other different inducements—that is perhaps the wrong word. They need assistance to put them on the level playing field—a phrase the noble Lord, Lord Colnbrook, does not like.

It is important in that all our continental, European and EC partners in one way or another favour ship operation in a way that we do not. Why should we be at a disadvantage compared with our EC neighbours? I have never understood why during the past 20 years successive governments have not recognised the disadvantage under which our ships operate and have not done something about it. I am now more hopeful. Only last week the Prime Minister said that he intended to encourage export and employment. In helping shipowners he will do both.

On the assumption that something can be done to help British shipowners, the next thing that they will want to do is build new ships. The average age of the UK fleet is 16 years, which is a horrifying figure when one thinks that 20 years is considered to be the maximum economic life of a merchant ship.

I hope that when a British shipowner requires a new ship he will wish to build it in the UK. However, he will at once find that he is at a considerable disadvantage. A shipowner investigating the order for a new ship will discuss it with the ship financing department of the Department of Trade and Industry, where he can obtain 80 per cent. of the price of a ship in terms of a soft loan. But in order to secure that loan the department will accept only 30 per cent. of the price of the ship as security; the balance must be found by the shipowner. That means that the owner must find security for 70 per cent. of the price of the ship. In Germany they allow 50 per cent. In Denmark they will permit 60 per cent. of the price to be accepted as security and it is possible to cover another 20 per cent.—that is, up to 80 per cent.—by insurance, which means that the shipowner has only to provide the balance of 20 per cent. from security in some way or another. That is a substantial disadvantage to British shipbuilders and shipowners wishing to place orders in the UK.

I know that representations have been made over many months with the respective departments but so far no action has been taken. I hope that the Minister in his reply will be able to give some assistance on that point

6.14 p.m.

Baroness Platt of Writtle

My Lords, I am grateful to the noble Lord, Lord Greenway, for initiating this important debate. Britain has a long history as a maritime nation—this sceptred isle set in a silver sea; how could we be otherwise?

During the Second World War, as an aeronautical engineer, I worked on developing high-speed fighter aircraft which played a vital role in helping to win the war. But in those rationed days we were also deeply aware that our food and supplies depended on the courage and endurance of our Merchant Navy officers and men and the existence of a powerful fleet of ships.

As has been said this afternoon, in 1939 we had 25 per cent. of the world tonnage in our ships and led the world. Now we own 2 per cent. of the world fleet—a shadow of our former selves. Where would we be if we had to depend again on our merchant fleet? However, even if we put aside the fear of global conflict, a strong Merchant Navy is still vital to our prosperity as a country—a factor which must be uppermost in our minds as we climb out of our present recession.

Shipping carries over 90 per cent. of all British imports and exports and 40 per cent. of all trade between European countries. In the future we must carry our fair share of that trade in our own ships, employing our own seafarers. We must build for the future on our strong maritime tradition. Properly encouraged, our ship-building and ship-owning industry can recover much of its position in the world. Our safety record is second to none.

As a member of the Select Committee on Marine Safety in your Lordships' House we were aware of the need to safeguard our shores against environmental disasters. Since then the "Braer" has gone ashore in the Shetlands and the "Exxon Valdez" is still fresh in our minds. They were not British ships.

Efforts must be made internationally to bring home to ship-owners and operators their responsibility for ship safety as our House of Lords' committee, under the chairmanship of the noble and gallant Lord, Lord Carver, recommended. As we stated, in the long term we need to move towards a safety case being made for every ship in operation throughout its working life, with which the Government expressed considerable sympathy. The Government are also, on the "polluter pays" principle, pressing in Europe for higher limits of compensation on an international basis for restoration after an environmental disaster, and during our presidency secured the adoption of a directive requiring the reporting of information about carriage of dangerous goods by sea.

Transport by sea is generally environmentally friendly. But strict control is necessary of the cowboy ship-owners operating rust buckets long past their sell-by dates and operated by poorly trained crews who sometimes do not understand each other's languages. Those are the recipes for disaster, which, by contrast, do not occur in general with British ships because of their high safety emphasis.

As we also recommended in our report, stricter control needs to be exercised through IMO and Europe in particular where countries are known to have ineffective flag state controls and classification societies. The Paris Memorandum on Port State Control is already putting that into action, and also the inspection of all foreign-flagged ships entering Paris Memorandum ports for the first time, as is the practice in the USA.

All those kinds of controls will help Britain's Merchant Navy and gradually put out of action the cowboys. However, they emphasise the need for up-to-date ships incorporating in their design safe materials and new technology. Ships operate in a hostile environment, carrying cargoes that can be highly corrosive. I know that the Government are exercising pressure to improve international control in that direction through IMO, whose HQ is in London. I wish them every success.

British ships properly crewed by British officers and crews can continue to uphold our high safety record. But at present our fleet is 16 years old, as other noble Lords have said, and badly in need of renewal. I remind your Lordships that a ship's economic life is about 20 years. World trade is set to increase by around 4 per cent. a year so there are good markets available which, in British hands, can help reduce our present balance of payments deficit by increasing our world share both in carrying cargo safely and also by maintaining our share of invisible exports. In many ways the City of London is the centre of the maritime world and needs to remain there, continuing to make a substantial contribution of more than £1 billion to our balance of payments. Already the contribution of the shipping industry to our balance of payments is half what it was in 1980. We need to reverse that decline.

As other noble Lords have said, other governments in Europe and worldwide are far more generous to their merchant navies than we are, and that contributes to our declining share of the trade. I support the Government wholeheartedly in their efforts to eradicate national subsidies so that we have a truly free market in the future in shipping. We shall not, however, be in that happy situation for some time. Meanwhile, our shipping industry is anxious to regain its share of world trade. However, investment in ships is highly capital intensive and at present the industry needs fiscal incentives at least on a level playing field with the rest of Europe.

The Autumn Statement extended capital allowances from 25 per cent. to 40 per cent. on a temporary basis, which is a help. I feel, however, that the industry needs a better kick-start than that if it is to regain something of its position over the next five years. I hope, in concert with my noble friend Lord Colnbrook, that the Government will meet the shipping industry leaders, whether ship-owners, ship-operators or shipbuilders, and discuss how we can regain something of our maritime position over the remainder of this century and that they will then take the necessary action. If Britain builds fleets and trains crews now we shall benefit financially from a greater share of world trade in the future. I am glad to hear that the Government meet half the training costs of officer cadets, to the tune of £3.2 million this year.

If the trade invests in building new ships with fiscal incentives from the Government, the subsequent UK trade returns will ensure that the Government will also reap their financial rewards in future years, both from the resulting increase in trade and invisible exports and reduced unemployment. We shall also retain London's central position in the maritime world. That must be good sense for UK Ltd., and the alternative is unthinkable.

I hope that my noble friend the Minister can assure the House tonight that he will take positive steps, in co-operation with our shipping industry, as soon as possible so that the UK Merchant Navy can once again fly the flag and uphold its worldwide trading position with pride.

6.22 p.m.

Lord Carver

My Lords, like other noble Lords, I am most grateful to the noble Lord, Lord Greenway, for having initiated the debate on this important subject. I propose to concentrate on one aspect only—safety. Unlike my dark blue noble and gallant colleagues—I am sorry to see that neither of them is here today—that is the only one I am qualified to speak about, and only because I was chairman of the Sub-Committee of the Science and Technology Committee, whose report on this subject was published in February of last year. I apologise to the House and to the noble Earl that I shall not be able to be here when he replies because, as he knows, I am due to speak on this very subject to the annual dinner of the Royal Institution of Naval Architects.

When our report was debated in the House on 1st June last year, the noble Earl, in replying, was about as non-committal as it is possible to be. It was therefore a very pleasant surprise, when the Government's official response was published six months later, to find that a revolution appeared to have taken place within the Marine Directorate of the Department of Transport. The Government accepted almost all our recommendations, although our principal and most fundamental one only with certain reservations. That recommendation was that, in the long term, the basic principle by which maritime safety was regulated should be changed from one based on prescriptive rules, as is now the case, to one based on a scientific assessment of risks and the production of a safety case, covering all aspects of ship safety.

We were therefore greatly encouraged when the Government's response accepted that the goal we had set was a desirable one, and announced that they would take the initiative in trying to move the International Maritime Organisation in that direction. However, they expressed reservations as to whether it would ever be practicable to apply a safety case regime to every individual ship or to dispense with prescriptive rules altogether. We were further greatly encouraged when the Department of Transport recently produced a paper for consideration by the Marine Safety Committee of the IMO, recommending that formal safety assessment—as it prefers to call it—be applied wherever possible, and that a special working group be set up to consider the matter. It is an excellent paper.

Having congratulated the Government warmly on the revolution in the department's thinking, I shall turn to two other aspects of their response to our report about which I shall not be so laudatory. The first is what the official response said in respect of the part that might be played by the European Community. We made one long-term and two short-term recommendations. Our paragraph 11.52 stated: For the long term, we envisage a European maritime safety organisation, with responsibilities and powers similar to those of the US Coast Guard, acting as the executive arm of a European Department of Transport, with the status of a Flag State". Our short-term recommendations were that the European Community should make it mandatory for passenger ferries, oil tankers and ships carrying hazardous cargoes, sailing in European Community waters, whatever their flag state, first, to make a safety case meeting primary safety goals agreed among the member states; and, secondly, to meet a standard of verifiable safety management systems, based on that already recommended by the IMO.

The Government's response was cool. They pointed out that progress could be delayed by trying to involve the Community as well as the IMO in discussion, and that the UN Convention on the Law of the Sea only allowed coastal states to impose unilaterally, generally accepted international rules and standards such as those agreed at IMO". That has not stopped the Government from disregarding that —I do not blame them for it—in respect of passenger ferries.

Everyone agrees that the most urgent need is to improve the enforcement by flag states of standards agreed in the IMO while at the same time trying to improve those standards. The first step is to get a standard agreed as recommended: the second, to get it accepted as mandatory; the third, to get individual flag states to translate that into their own maritime law; and finally to monitor their enforcement of that law. In a voluntary organisation of 132 members, many of whom have not the resources and some not the will to enforce their law, it is inevitably a slow and incomplete business.

Ninety-nine years ago, when our Merchant Shipping Act was passed, we held such a prominent position in international shipping that we could enforce our own standards. With a miserably small fleet today, we no longer carry that clout. Europe together, however, could carry a good deal. Over a quarter of the world's seaborne traffic passes through European ports. If Europe was to make IMO-recommended standards mandatory for ships entering its waters, ships which did not meet those standards would be excluded from a very important area of world trade, and Europe itself would not suffer, except perhaps in some rise in freight rates. Some people would like a rise in freight rates.

The objection often raised against such action is that it would encourage the emergence of different standards in different parts of the world to the detriment of the free movement of international shipping, and that it could lead to protectionism, as exists in the case of cabotage. The United States unilateral imposition of a double hull standard for tankers is quoted as an example of that. But there are those who approve of the US action and point out that it has helped the IMO to introduce a higher standard, arguing that concerted action by Europe could help the IMO in other ways.

Ideally, co-operation should include all European coastal states, but only the Community has the political machinery to concert action of this nature. One must hope that enlargement of the Community will eventually embrace them all. We do not want Europe to develop different standards from the IMO, but to use its weight to improve standards; to be prepared to make recommended ones mandatory in advance of general agreement and to ensure that, at least in Europe, those standards are uniformly and strictly applied both to its own ships and to those calling at its ports and sailing through its waters.

The European Commission has recently submitted what it calls a "communication" to the Council of Ministers which proposes just that. The noble Lord, Lord Cooke, referred to that. It includes measures to improve port state control very similar to those we recommended, and the measures which, with one exception, the Government endorsed. It is called A Common Policy on Safe Seas and includes an action programme. The noble Earl has informed us that the Government welcome the main elements of the action programme. That is a welcome change from their cool response to similar proposals in our own report. I hope that they will give the Commission their active support and that when the noble Earl replies he will have something to say about it.

One of our important recommendations was that the Surveyor-General's Organisation of the Marine Directorate of the Department of Transport, should not only be substantially increased in strength, but also that it be reconstituted as an independent statutory civil maritime authority on the pattern of the Civil Aviation Authority and should eventually assume a wider responsibility for maritime safety.

There are two reasons for this. The first is that there are far too many different bodies in this country separately concerned with different aspects of maritime safety and there are elements of that safety which get lost between them. The other is the need for the regulating authority to be, and to be seen to be, truly independent. That is not the case now when the Marine Directorate is under the political control of the Department of Transport which sponsors the shipping industry. A large element of responsibility lies with the classification societies, which are the clients of the owner, and the results of their inspections, other than the issue of a class certificate, are confidential between them. This is in stark contrast to the position of the Civil Aviation Authority and even more so, of the Health and Safety Executive.

Not long after our debate last June the Government announced their intention to convert the Surveyor-General's Organisation into an executive agency. We welcomed that as a first step towards the independence we favoured, although we again emphasised the need to strengthen it. Our recommendation that it should be an independent statutory authority was rejected on the grounds that it would require primary legislation which would not be justified.

But since then the department has produced a consultation document called The Surveyor-General's Organisation: Options for the future of Ship Survey and Certification Work, which causes us grave concern. Far from strengthening the SGO and increasing its independence, it proposes that it, and its successor the Marine Safety Agency, should contract out its survey and certification work, either by licensing organisations to do it on its behalf, allowing shipowners to choose which one; or by contracting out blocks of survey and certification work to the same kinds of organisations. In either case, in practice, these organisations would almost entirely be the classification societies. In the words of the consultation document itself: The role of the new agency would be confined largely to policy-making and inspection work". We believe, and have told the noble Earl, that this is a move in the wrong direction, away from our recommendation for a single, strong ship safety authority independent not only from the Department of Transport, but also from the shipowning and insurance interests. It envisages a smaller organisation or agency, even more dependent than at present on the classification societies. That cannot improve confidence among seafarers, passengers or those at risk from marine pollution; and it is at variance with the welcome trend at the IMO towards tighter flag state control. There is wide support for our view on this matter and I beg the Minister to urge his right honourable friend the Secretary of State to drop this flawed proposal.

6.34 p.m.

Lord Lucas of Chilworth

My Lords, one of the great advantages of the way in which the noble Lord, Lord Greenway, has drawn his Motion is that it gives us an opportunity to go wide and far. One is not restricted in any way to following a particular pattern. This evening I would like to discuss two points. The first is what I call the wider trade issue. My understanding is that about half of present orders on British shipyards and marine equipment suppliers is in fact provided by British shipping companies. As the noble Lord, Lord Greenway, pointed out, with a fleet coming towards the end of its economic life, there is prospect of renewal, if not perhaps of an expansion programme.

If that were to take place then the considerable advantage both to our own yards and to marine equipment suppliers would be enormous. Even where British shipping companies build abroad, about 60 per cent. to 70 per cent. by value of a merchant ship is in equipment. I understand that the marine equipment business turnover is about £2 million a year. Any renewal programme and increase in the build would have a direct effect on that; similarly therefore, there would be a direct effect on our manufacturing industry base and employment generally.

I believe it was my noble friend, Lord Colnbrook, but others also, who mentioned the manner in which the Government might give assistance. Some have called it pump priming; others have suggested that investment allowances could take a different form. Certainly they could take longer-term forms so that the investment programme could be cycled over a number of years and not be subjected to annual budgetary considerations. I urge my noble friend the Minister to prevail on the Treasury to look further at the replacements and assistance, without subsidy, which can be given to builders and to the shipping companies in the replacement of fleets.

I believe that it was my noble friend Lady Platt who drew particular attention to the other area in which the shipping industry makes a significant contribution. That is through the range of financial and other services available in the City of London. Those services make a substantial contribution to invisible earnings, estimated at between £1 billion and £1.5 billion sterling each year. All those services rely to a greater or lesser extent on the business that British shipping companies provide for them in the domestic market and the flow-through of seafaring and shipping company expertise. As my noble friend Lady Platt said, the maintenance of London as the maritime world centre depends in the long term on the continuance of a substantial and profitable national British shipping presence. I do not believe that that should be put aside from our thinking, because any diminution in the influence which the City of London has in world affairs will have a detrimental effect on UK Limited.

There is of course no doubt that the merchant fleet both in the United Kingdom and globally, faces problems in adjusting to the current challenge of depressed markets, although, as we have heard, there has been a small growth of around 3 per cent. to 4 per cent. per annum. However, the merchant shipping industry is, I suggest, in a unique position in that, in its role as carrier of the world's trade, increases in costs can and do have disproportionate effects on trading conditions in other sectors. In recent months there have been some fairly large rate increases on the North Atlantic, for example, and this has undoubtedly caused lost markets in the USA, where exporters have not been able to pass on the increased costs and still remain competitive. On the other hand, although the shipping freight industry may be depressed, that has to be seen in conjunction with the wider world trade markets.

A possible cost increase which is causing the industry some concern is in the area of further environmental controls. I do not wish to diminish in any way the responsibility of Government—or of any industry for that matter—for the protection of the environment, but we have to be quite sure that further cost increases on that front will result in real and increased benefit to the environment. For example, there are numerous international agreements concerning pollution—primarily, I understand, the 1973 MARPOL agreement, to which the United Kingdom is a contracting party. Yet, despite this and consequent IMO updates, breaches of the agreement are commonplace. The point that I make is that proper enforcement of what is already in place is preferable to and will have a greater cost benefit than another layer of controls.

This brings me to the second of the two points that I wished to raise, on which the noble Lord, Lord Cooke of Islandreagh, and the noble Lord and gallant Lord, Lord Carver, have spoken at some length. I refer to the role of the International Maritime Organisation. The IMO is only 36 or 37 years old. It is a respected body, operating under the auspices of the United Nations but, by any value judgment, it is, as an international body with global responsibilities, woefully short of funds. The 1993 budget of the organisation is only £15.7 million. It employs only about 300 staff, most of them in London. Although its standards are universally recognised as sensible and effective, there is an inherent weakness in the organisation, in that it is just not able to enforce the standards which are universally agreed. I think that the IMO should be given a greater role in the areas of pollution control, safety crew training, manning, maintenance and so on.

If my noble friend the Minister is able to do so this evening, I ask him to explain a little the thinking behind the European Community's Communication, A Common Policy on Safe Seas. If not, perhaps he will write to me. The Communication is broadly acceptable and one cannot really take offence at what is set out in it. I noticed that at the March meeting in Brussels of the Council for Transport, at which my noble friend the Minister is shown as having been present, it was underlined that the Commission's Communication contained an "action programme" which included measures intended to support international organisations, enabling them to strengthen their primary role in international standard-setting. I take it that that refers specifically to the IMO, unless we are to expect the Community to impose yet another layer of control, with which comes confusion, cost and the inevitability of adopting the lowest common denominator. Does my noble friend agree that it is important that the standard-setting role of the IMO (in a global rather than a regional context) should be strengthened and regional rules avoided so far as possible?

There are expressed serious reservations concerning the suggestion that certain IMO resolutions should be translated into EC law, on the grounds that it is doubtful whether that is right in principle or will have any significant effect on safety. I raise a question—surely any changes considered necessary to existing international conventions and resolutions will best be pursued through amendments to those instruments which are already in place, most of which are controlled and were introduced by the IMO?

It seems, therefore, that in the general field of safety, the raising of standards and greater efficiency—and therefore of lower costs—control should reside with the IMO rather than the Community. I hope therefore that my noble friend the Minister will give tangible support to that organisation.

6.46 p.m.

Viscount Allenby of Megiddo

My Lords, I too would like to thank the noble Lord, Lord Greenway, for initiating this important debate today. I am reminded every time that I walk through the Royal Gallery here in the Palace of Westminster that we are a maritime nation. I am proud to have come from seafaring stock; my grandfather having been a captain in the Royal Navy. I must profess, however, that I have little or no knowledge of the Merchant Navy.

British shipping is recognised throughout the world as one of the world's leaders in many of its skills and for its efficiency. We were rightly reminded in January this year, by Early-Day Motion No. 1225 in another place, that if the present decline in the size of our Merchant Navy was not reversed, then damage to the United Kingdom economy would occur and the defence of this country could well be threatened.

There is a very real danger of the British merchant fleet disappearing altogether if the present trends continue. Just to quote one statistic from the Chamber of Shipping, since December 1985, the number of employed seafarers has declined by 44 per cent. from 34,000 to just over 19,000 and by over 10 per cent. in the past 18 months up until the end of last year.

I would like to highlight just two basic problems. First, the British tax system and especially that relating to tax allowances does not encourage the owning of ships by British companies. As most noble Lords will be all too aware, British seamen are comparatively expensive to employ and so many ship operators even when they are under British flag have the minimum of Britons in the crew (master, mate and chief engineer) and have the rest of the crew from elsewhere in the world where labour is cheap. The tax problem is both technical and complex but is well-known. I would say that it was a disappointment that the Chancellor of the Exchequer did not bring forward any measures in his spring Budget to assist our merchant shipping in the future.

My second point, which relates to support vessels, is bad and getting worse. Many of the support vessels in the North Sea now have their rating from Cape Verde or, increasingly so, from the states of the former Soviet Union and Poland. Without in any way wishing to appear protectionist, it is hard to know how the Government can stop the commercial ship-owner from doing this. In a competitive international market, he—the ship-owner—must seek minimum cost and the British crew costs are 40 to 60 per cent. of the daily running cost of the ship. If it were possible to cut the wage bill in half it goes without saying that a great deal of money would be saved.

There is an area, which is within Government control, which would help to stem the decline of the Merchant fleet and could make some difference. The Royal Navy is planning to pay off its survey flotilla during the next few years, as indicated by the noble and gallant Lord, Lord Carver. Already two vessels are on charter from the commercial fleet for survey and this requirement will increase. There is an increasing survey requirement to establish traffic routing following the "Braer" accident in the Shetlands. There is also the chartered research requirement and the need for naval training vessels. I put it to the Minister that it would be easy and very helpful for all Government charters to include a clause demanding British and EC crews. I am certain that there is a snag to that. However, when one considers the large number of unemployed people in this country and the many youngsters who would jump at the opportunity to go to sea rather than wander aimlessly around our cities and towns one realises that the cost to the Government would be minimal and would involve between 20 and 24 people per ship.

Finally, I should like to touch on the question of defence. Historically our merchant shipping has been the nation's fourth arm of defence, as was said by the noble Lord, Lord Colnbrook. In the Falklands, the Gulf and now in what was Yugoslavia the Ministry of Defence has been totally reliant on taking up shipping from trade to get equipment and stores, which are either too bulky or too heavy, to move by air to the theatre of operations. Without that means of transport our forces would not be capable of operating on land.

With the demise of the eastern bloc forces and the resulting reduction of NATO forces in Europe the future demand for shipping may well be increased rather than the opposite. As Captain Roskill so aptly put it in his history The War at Sea: The History of the Second World War: Every strategic purpose conceived by the Allies, and every operation which they planned and executed was conditioned and controlled—and too often restricted—by the difficulty of providing the necessary shipping". That is a lesson from the last war which we ignore at our peril. We just cannot become totally reliant on foreign shipping to move our men and supplies to wherever we want them. In recent months senior defence staffs have repeatedly warned that the numbers of British ships and sailors are already at a crucial level and that that situation can no longer be ignored.

6.53 p.m.

Lord Fairfax of Cameron

My Lords, I too thank the noble Lord, Lord Greenway, for initiating the debate on such an important economic subject. I have been involved in the shipping industry for the past 10 years mainly as a lawyer in the P&I sector. Therefore, I have some personal experience of the subject about which we are speaking today.

British merchant shipping is currently a major British industrial success story. Perhaps your Lordships will forgive me if I repeat some of the statistics which have been mentioned. Each year the shipping industry contributes more than £2 billion to the balance of payments. That makes it the third largest contributor to invisible earnings. The British shipping sector employs about 20,000 people at sea and 30,000 people ashore. Many thousands of others are employed indirectly especially in maritime service-related industries. We have also heard that the industry provides about 50 per cent. of the orders for British yards.

Only yesterday I attended an interesting meeting of the Parliamentary Maritime Group on the subject of the shipyard industry in the United Kingdom. I heard what a slimmed-down and vibrant industry it is today. When we consider that the industry depends on the British fleet for 50 per cent. of its orders further strength is added to the argument about the employment consequences related to the decline of the fleet.

We have also heard about the industry's important relevance to national defence. I need say nothing further about that. Finally, the British merchant fleet and its former strength help to maintain London's focus as a world shipping centre. Reference was made to the IMO. It is no coincidence that the IMO is situated in London, which reflects our former pre-eminence in the sector.

But today the British Merchant Marine is not operating—I shall not use the phrase "on a level playing field" because I have thought of a maritime equivalent—in a level seaway. The shipping industries of most European nations—for instance, France, Germany, Italy, Denmark, the Netherlands and so forth—are supported fiscally by their governments one way or another. The British merchant fleet is not supported to the same extent, which presents something of an irony. The noble Lord, Lord Colnbrook, referred to the fact that we are an island race. There is a certain irony that being an island race, which historically has depended to such a large extent on its fleets, we provide less support to that fleet than any of our European competitor nations. Some support is forthcoming but not enough. If the Government say in reply that it is a question of levelling out the seaway so that in due course within the European framework the conditions applying in all countries are the same, that is fine but, as we have heard, that position has not yet been reached.

The result of all that is that shipping's contribution to the balance of payments is half what it was in 1980. British shipping companies, with some of the most famous names among them, are either flagging out, going off-shore or disappearing altogether. Our registered fleet is now only 33rd in the world. Somewhat incredulous references have been made to Malta and Cyprus. Those of us involved in the shipping industry will realise that they are growing registers because it is attractive for shipowners to register there. What a shame that there are now 32 nations ahead of us in registration.

If the current trends continues it is estimated that there will be no UK-registered fleet by the second half of the 1990s and no British-owned fleet by 2010. No doubt the Government will say that that will not happen, but that is a sobering thought. Among the disastrous effects which that will have on this country are the economic effect, the effect on the balance of payments, employment direct and indirect, London's status as the centre of world shipping and the important consequences for defence.

I have some personal experience of the shipping sector and wish to take up a point made by the noble Lord, Lord Cooke. He spoke of the reliance of certain service industries on seamen, officers and crew of the British flag fleet coming ashore and subsequently working in those industries, which are of particular importance to London as the world centre of shipping and to UK industry generally. They include surveyors, average adjusters, Admiralty lawyers, P&I clubs and so on. Those industries, which dominate in London and make London pre-eminent in the field, are staffed mainly by former British seafarers who have come ashore and turned their practical experience of the sea into economic use in the invisible sector. That is of particular benefit to the economy of this country. If the predictions are correct and there is no British fleet in the future, those people will not be available and the industries will have to look elsewhere because they will not find in this country the necessary qualified staff upon whom they rely for their existence.

As I say, there must be a level European seaway for European shipping companies. The Government must support the British fleet in the way in which some of our competitor nations do. The Government may say that that is not within their policy framework. In that case, I should like to give a recent, rather poignant example, which indirectly concerned the shipping sector, in which the Government were prepared to listen to economic arguments in order for something not to happen. Ironically, it was directed by definition only at people who are not domiciled in this country.

About four years ago there was a change in the general tax status of individuals. Many of the major figures in world shipping, who physically and formally run their operations from this country, were threatened with taxation of their worldwide incomes. The threat was not only to shipowners specifically but they were one of the main categories affected. Those people mounted an extremely successful campaign and the Government changed their mind. Those fiscal changes would have affected in particular the Greek shipping community. The Government feared the withdrawal of that extremely significant economic force from London, because they represent billions of dollars in revenue passing through British banks. The Government caved in, and most people no longer face the threat of that taxation and they continue to reside in this country, with the consequent positive effect on the British economy. Therefore, if enough economic force is applied, progress can be made.

I hope that this debate has demonstrated that if the Government are prepared to spend £1 today, they may save or even make £2 or £3 tomorrow. If they are in the business of backing winners, I invite the Government, as all previous noble Lords have done, to look favourably upon the British maritime sector and adopt positive fiscal policies. In particular, I recommend the Chamber of Shipping's maritime enterprise zone proposals.

7.5 p.m.

Lord Amherst of Hackney

My Lords, I too thank the noble Lord, Lord Greenway, for initiating this much-needed debate. Some 60 per cent. of the world's deep sea fishing is made up of tankers and bulk carriers. It is in that sector that the full extent of our maritime impotence becomes apparent.

If the conglomerates of Shell Tankers and P & O Bulk Shipping were to be taken out of the equation, because neither is a pure ship-owning company, and if foreign-owned subsidiaries are excluded, then the tonnage controlled by the United Kingdom in this sector is virtually non-existent. What we see today is the result of a laissez-faire policy or perhaps of no policy at all.

The Norwegian Government comprehend that shipping is not only affected by world economics but also by world politics. This is the incalculable human element that can send shipping markets, without warning, through the roof or through the floor.

In 1986, for instance, a 10-year old tanker of 250,000 tons deadweight would have been worth about 6 million dollars. Three years later that self-same tanker would have sold in 1989 for some 25 million dollars and now, in 1993, that tanker would again be worth about 6 million dollars for scrap. In fact, in 1989, Shell Tankers decided to buy three such ships, built in 1977, from the Onassis group. Shell spent about 90 million dollars altogether because it thought that the ships built in the mid-1970s had far more steel in them than the current high-tensile constructed VLCCs. For its part the Onassis group happily pocketed the cash and waited for the shipyards to become less steamy because they had been becoming very steamy and, hence, Shell had moved. The other day the Onassis group took delivery of a brand new 300,000 ton double-hulled tanker. It will be extremely interesting to see who was right. I am afraid that it was probably the Onassis group.

Quite obviously for shipowners to survive in such a severely cyclical business, they have to be able either to carry out their fleet disposals and replacements at completely different times or be provided with a compensatory tax structure.

The Norwegian Government grant their owners tax roll-over relief for up to seven years. The United Kingdom shipowner, on the other hand, has nine months. The Norwegian controlled fleet amounts to 48,000,000 tons deadweight against the United Kingdom's 14,000,000—and I question whether some of that is genuinely UK-controlled. The Germans maintain a substantial and very modern fleet in gross tonnage terms by granting private investors in German shipping 150 per cent. tax allowances.

The Greek flag tonnage is generally owned by Liberian or Panamanian companies and thereby has not been fettered by tax considerations at all. The Greek controlled fleet now amounts to an incredible 104,000,000 tons deadweight and is second to none in size.

It is impossible to have a debate on the Merchant Navy without reference to the Baltic Exchange. This unique shipping exchange, of which I have been a number for nearly 25 years, currently brings in vital foreign earnings to the tune of 1.4 billion dollars per annum, but, how can those earnings be maintained and indeed enhanced? The inception of this exchange in 1744 was to service the Empire, the coal trades and the British merchant fleet. Now, the exchange has to live on its very considerable broking skills, but its world is becoming ever more competitive.

The Minister, on attending the re-opening of the Baltic Exchange, was quoted as winding up his speech by saying to the chairman: British Shipping has come out of this commendably well due to you and your staff". One can only hope that the Minister observed that the chairman, in his speech, hastened to thank not the Chamber of Shipping, but the London Greek shipping community, and, to emphasise that without its support and co-operation it would have been almost impossible to continue. If we cannot support our Merchant Marine, then, let us at least ensure that our famous maritime institutions survive and prosper, by once again becoming a maritime nation of consequence.

Let us capitalise upon our maritime heritage, our expertise, our administrative capabilities, and our technical and teaching skills by setting up and managing the best open register in the world. Let us offer the respectability of full and proper British registration to any ships and crews of foreign-domiciled owners who will abide by our rigorous standards of crew training, offer certification, vessel inspection and pollution control. Let us provide a home for the 20 million tons or so deadweight that is likely to make an exodus from Hong Kong in 1997.

Offshore ownerships from within the EC and fleets from old iron curtain countries have already shown interest in the concept of such a prestigious and scrupulously run open register which would be void of the stigma of cheapness. A British open register would create jobs not just in the implementation of the register but in the setting up and running of nautical colleges and training establishments. It would bring offices to London and business to the Baltic Exchange, and all the other maritime services that we offer such as the Lloyd's insurance market, the Lloyd's Classification Society, the protection and indemnity clubs, the maritime law firms which have already been mentioned, the London Arbitrators' Association, the ship managers, marine consultants, maritime banks, ship repairers and perhaps even our shipbuilders.

Such a register would embody the United Kingdom's right to requisition in the event that the realm is threatened or, I suggest, if a United Nations directive so requires. At the time of the Falklands war in 1982, all 56 ships requisitioned were British-registered, but in the 1991 Gulf war only six of the ships used by the United Kingdom were British-registered. In fact some of the business went overseas through non-Baltic Exchange channels and is, I understand, currently subject to investigation. That surely underlines the wisdom of all government departments in future utilising the services of the government freight market representative who is employed by the Baltic Exchange.

The matter of a British open register has already been raised with the Minister. I can only urge that a positive decision be given at the earliest possible opportunity, regardless of whether or not the British registry is to be privatised. Let us, with the stroke of a pen and at little cost, at least put the great back into shipping in British.

7.12 p.m.

Lord Carmichael of Kelvingrove

My Lords, I must first apologise to the noble Lord, Lord Amherst of Hackney, for butting in. My register was out of sync. I am glad that I was able to hear him because some of his ideas were extremely original. I do not know whether the Minister will be able to deal with them, but it will be interesting to hear his response to the idea of an open register and maintaining European standards, something which most of us would wish if it were possible.

The noble Lord, Lord Greenway, is well known to the House for having a great knowledge and understanding of shipping problems. During the passage of the Pilotage Bill we met each other a great deal. It was interesting to hear him. I have great respect for him. He knows a great deal more about the subject than I do and possibly more than any other Member of the House.

Shipping debates in the House have always been good because they have brought out the breadth of knowledge and experience of many noble Lords, something which it is not easy to obtain in the other place. During the past two years there have been at least two excellent debates which I must admit to having consulted fully over the past few days. In February 1991 the noble and learned Lord, Lord Oliver of Aylmerton, presented the report of the sub-committee of the European Communities Select Committee. On 1st June 1992 the noble and gallant Lord, Lord Carver, presented the report of the Select Committee on Science and Technology on the safety aspects of ship design and technology. His speech today was good. He obviously still has a great interest in the subject. His main interest today was safety.

Those debates were of a high standard. They should have had a wide circulation among the public and not been limited to the shipping press and circles associated with shipping. People still have a vague feeling that we are a first-class maritime power. Someone said earlier that people do not travel as passengers on ships because they now travel by aeroplane. Also, our ports are much quieter. To some extent that is because many of our older ports cannot take the big ships. People living near the coast who used to see ships going backwards and forwards see fewer of them now, especially near our older ports.

The point that has emerged strongly during the debate is that our fleet is too old and its replacement is not keeping up with normal obsolescence. The average age of the fleet is 15 years. Given that the working life of a ship is 15 to 20 years, we shall hit a crisis in a few years. In the past 10 years the age of our fleet has dropped, as has been said, from being the 13th youngest in the world to being the 33rd youngest. The economy of running new tonnage as against older tonnage was pointed out clearly by the noble Lord, Lord Sterling of Plaistow, in one of the earlier debates. He also explained that the tax system in Britain was detrimental to British shipping as against that of the 15 countries looked at by the Government and industry joint working party. Some way must be found, either through taxation or building grants, to help modernise the fleet.

In one of the debates the Government said that some help would be coming to British shipping in the near future. We all believed that that would be in the Budget. I did not see anything about that in the Budget. Perhaps the Minister can point us to where the Budget will help British shipping. Perhaps the Minister would let the House know, either now or later, how the financial position of British shipping has changed and how financial aid to our industry compares with that of the most generous nations.

As well as the decline of our merchant fleet, we have a dire shortage of trained crews. Again, the figures were given by other noble Lords. Between 1980 and 1990 the number of officer cadets fell from 1,274 to 512. I understand that an effort was made to increase that figure, and that was widely welcomed in the House at the time. But my latest information is that the figure for 1992–93 may be as low as 370.

The noble Lord, Lord Amherst, suggested that it might be possible to give the young unemployed an opportunity to join the merchant fleet. He is right. If the conditions were right I believe that a great many of them would be only too happy to do that and they might be very good.

Will the Minister say something about training, and whether the Government have plans to increase grants and inducements for cadets in training? It is suggested that by the turn of the century we shall have just over 5,000 officers and 5,00 ratings as against the 1980 figures of 28,000 officers and 23,000 ratings of British nationality and largely British-trained. Those are dreadful figures. Even allowing for the increase in technology, they make it difficult to believe that there is any way in which we as a nation can remain at even our present not too glorious position as a shipping nation.

In a debate in 1991 my noble friend Lord Callaghan of Cardiff quoted from the report of the review that was chaired jointly by the department and the shipping industry. He said: The Government is concerned to see an efficient entrepreneurial community fleet. It believes this will best be achieved in a free market, without subsidy". That was in 1991. I do not know how many believed that process was possible then, but in the face of all the evidence of other countries and the new interpretations in the past three years of the unsubsidised market, I cannot believe that that quote will be greeted with much enthusiasm now.

It has been fairly clear from this debate that there is no future for the British industry in an unfettered market. I would like to see the building and running of ships being subjected not just to narrow market conditions but to a cost benefit analysis of the benefit to the nation of shipping. It is all very well for a single shipowner or a single shipyard to do well, but we need to assess the benefit to the nation of shipping not just now but in 20 years or more. At the end of the day we usually pay the price of sticking too closely to the free market. Germany has announced new subsidy arrangements for its shipping. Sweden is producing new tax concessions. The Greeks are providing more government aid for shipping. The United States of America is looking at fiscal aid to ensure that its merchant fleet can survive against unfair competition. How do our measures for shipping compare with those of other countries?

I wish to deal with two other matters very briefly. One of them concerns the point that caused the noble and gallant Lord, Lord Carver, some anxiety when he spoke about the survey of ships and the Government's possible desire to privatise the work carried out by the department's inspectors of shipping. I do not know whether the Minister has seen the paper produced by NUMAST. It refers to a ship that left Rotterdam after being held in that port for a few days. The ship had structural damage. When it reached London it was examined by the surveyors of the Department of Transport who said that the ship was one of the worst they had seen. It needed some 13 tonnes replacement steel. Captain Alan Chadwick of the London area survey office said the corrosion could have jeopardised the ship's seaworthiness. I do not believe that British lives should be put at risk in such ships. I hope the Government will not consider hiving off the part of the Department of Transport that examines ships. As the noble and gallant Lord, Lord Carver, said, we need an independent, statutory body—one that is even independent of the department—to examine ships.

My final point has, I believe, only briefly been referred to. I wish to refer to safety, which can be gravely endangered if a crew consists of too many nationalities and therefore language problems arise. NUMAST has highlighted language problems as a major hazard to safety. The master of a Liberian bulk carrier told NUMAST how communication on his ship between officers and crew, was impossible, except in sign language". He concluded: I believe that our communication problems produced an inherent state of continuous danger to the ship far greater than a piece of equipment being out of date or not working". The noble Lord, Lord Sterling of Plaistow, has in an earlier debate given figures to illustrate the immediate benefits of flagging out. The benefits or otherwise of flagging out will fall at the end of the day on ourselves. That is one of the reasons why the British fleet is in such a bad state.

7.25 p.m

The Earl of Caithness

My Lords, tribute has rightly been paid to the noble Lord, Lord Greenway, on his expertise with regard to the merchant fleet, and also for giving your Lordships the opportunity to debate this important and emotive subject. I wish to join that tribute. I am particularly grateful to him for producing a debate that falls within my own sphere of responsibility.

Seafaring is an integral part of British heritage, as one would expect for a nation surrounded by water. We are rightly proud of that heritage and of the accomplishments of our sailors both on warships and in the merchant marine in defending the realm, opening new trade routes and prospering. On the question of trade, your Lordships have reminded us tonight that well over 90 per cent. of our trade by volume travels by sea from and to this country. But what many people do not realise is that about 25 per cent. of intra-UK trade also travels by sea and is transported by our coastal fleet.

Times have, of course, changed. Whereas freight transport is increasingly cheaper, margins and profitability are increasingly squeezed. World trade patterns have changed, resulting in new opportunities for shippers both here and abroad; and so too has distribution with the concept of "just-in-time" which means less warehousing but greater pressures on the reliability and speed of shipping services. These are daily challenges which our industry has to face.

The past 30 years have seen the emergence of fleets in the developing world which enjoy inherent cost advantages. This has been coupled with a shift in trade patterns, particularly in the Far East, which has helped these countries' fleets to capture an increasing amount of bilateral and cross trade.

During this time, the developed nations' fleet has shrunk from well over 80 per cent. to less than 60 per cent. of world tonnage. The registered fleets of the EC now account for less than 15 per cent. of the world's tonnage. Over the past 12 months, for example, the German fleet has decreased by 9.5 per cent., and so too has the Danish fleet; the Spanish fleet has decreased by 6.7 per cent. and the Dutch fleet by 214,000 tonnes. During the same period the UK flagged fleet has contracted by 2.9 per cent. Therefore the problems that our industry faces are not unique to this country but are shared by many other nations in the developed world.

The decline in the figure of the UK registered fleet belies the fact that the UK industry continues to be a key player in the shipping world. UK companies still manage, own or control some 6 per cent. of the world's fleet. But not all is doom and gloom. As the noble Viscount, Lord Allenby of Megiddo, reminded us, UK companies are acknowledged market leaders and innovators in cruise ships, ferries and container ships.

The UK's shipping industry is well placed to compete internationally. It is efficient, well managed and innovative. Additionally it can call on the extensive services of the City of London. Nowhere in the world is there such a depth of expertise or such a wide range in finance, insurance, reinsurance, arbitration, classification societies, salvage and shipbroking. The value of these services to the well-being of British shipping is self-evident. Equally, this unique concentration of such expertise and resources is good for Britain.

The City's contribution to the economic prosperity of the country is considerable and appreciated. I can assure my noble friend Lord Fairfax of Cameron and the noble Lord, Lord Amherst of Hackney, that we want that to continue. It is our goal to establish the framework in which British shipping can continue to develop into the competitive, viable shipping industry which we recognise is essential to our national well-being. The industry's response has been positive. It needs and wants to be free from unnecessary regulation, but we recognise that it needs also to be able to compete on fair terms within the international arena.

My noble friend Lord Colnbrook asked the Government to discuss the future with the industry. I agree with that sentiment. It is something that I have been doing in a consistent and enjoyable way over the past year. That has brought home to me the diversity of the shipping industry. One cannot refer to the shipping industry as though there were one simple solution to its problems. It is made up of a number of components, and what might be the right solution for one part of the British merchant fleet is not necessarily the right answer for the other part of the fleet.

That fact was highlighted by what the noble Lord, Lord Amherst of Hackney, said when he argued strongly the case for an open register. I have been to meetings with representatives of another sector of the merchant fleet who have argued exactly the contrary and said that the last thing we need in this country is an open register. I have heard arguments in the Baltic Exchange which are totally contrary to those which the noble Lord advanced today.

At this stage, perhaps I may pay tribute to Peter Tudball and all those in the Baltic Exchange, and also the Chamber of Shipping, for the way they handled the situation a year ago following the bombing. It is a great tribute to them that they were up and running within two days.

So far as concerns the Baltic Exchange a British merchant fleet is not necessary. The exchange would be perfectly happy and would continue to trade and bring in money for the balance of payments without a British merchant fleet. That gives a flavour of the complexity of the problem.

I can tell my noble friend Lord Colnbrook that the discussions with the industry are much more constructive and more intensive than when I was last Minister for Shipping some six years ago. That co-operation is manifest in the current developments.

The Government established a joint working party in 1990 with those in the shipping industry. That forum was tasked with looking at non-fiscal measures to increase the efficiency of the shipping industry. The working party made recommendations when it reported in September 1991. Work on some of those measures was put in hand quickly; on others work continues, but overall we have made good progress.

In particular, the working party recommended introducing flexibility into ship registration requirements. I am pleased to report that a Bill to give effect to that recommendation was introduced in another place earlier in the Session by my honourable friend Mr. Richard Page. The Bill—the Merchant Shipping (Registration etc.) Bill—has passed through all its legislative stages in the other place and received its First Reading in this House on 26th April. The Bill also paves the way for consolidation of merchant shipping law going back to 1894 and introduces the concept of bareboat chartering to the UK register. Those who have shipping interests at heart will wish to ensure a speedy passage for that Bill. In looking further to the future, we would all welcome a consolidation of merchant shipping legislation that goes back hundreds of years.

In introducing the debate, the noble Lord, Lord Greenway, reminded us that shipping by its very nature is an international business. Increasingly our industry has to compete against foreign shippers who, in many cases, have unfair advantages which we wish to see removed. For instance, we continue to work hard in the EC to focus on state aids and subsidies and to improve trading conditions.

I cannot give the noble Lord, Lord Carmichael of Kelvingrove, an answer to his question as to exactly what subsidies other countries provide. They come in various shapes and sizes. Some are disguised and some are more overt. It is for that very reason that we are asking the Commission to set that down on paper so that we can begin to analyse what each country has done. We want greater transparency in that area, which to date has been very clouded.

My noble friend Lord Colnbrook said that he had not seen the results of our intensive discussions. Perhaps I may be permitted to give him as an example the liberalisation of coastal cabotage within the EC, which was another recommendation of the working party. That was achieved under the Portuguese presidency of the EC, just before we took over the presidency. That liberalisation will enable UK companies to enter markets throughout the Community which are so far forbidden to them. Limited derogations are in place, for example, for island services, but those will be phased out by 2004. I can tell my noble friend that we shall continue with the same determination to obtain agreement within the EC on the other outstanding difficulties such as state aids and subsidies.

The second strand of our policy, and of paramount importance, is safety, which was mentioned by many noble Lords. The Government have not only a national responsibility but, by virtue of our membership of international conventions, an international responsibility to ensure that ships are safe for crews, passengers and cargoes, and that our shipping lanes and coasts are protected from pollution. The recent "Braer" incident has focused public attention on ship safety and the effect of hazardous cargoes on the environment.

I am pleased to say that, together with our European partners, we are pursuing our common aim to improve maritime safety standards. We welcomed the Commission's communication, A Common Policy on Safe Seas, which was presented to the Transport Council on 15th March. The aim of the communication is to develop a Community approach to increased maritime safety and prevention of pollution at sea. We have pressed strongly for its publication for some considerable time. The Commission's analysis and conclusions closely mirror our views, particularly on the crucial importance of excluding sub-standard shipping, of whatever flag, from Community waters.

Some noble Lords may ask why that has been of such major concern to us. We believe that sub-standard shipping is a major and urgent problem, not only to safety but also to the environment. More particularly, as the noble Lord, Lord Cooke of Islandreagh, reminded us, it also represents a serious distortion of fair competition. We strongly support the Commission's view that the problem lies not with the international standards set by the International Maritime Organisation but with the implementation and enforcement of those standards. The noble Lord, Lord Greenway, was right to stress the importance of the priority given to the International Maritime Organisation in the setting of those standards and my noble friend Lord Lucas of Chilworth was right to mention their enforcement.

The communication sets out a detailed action programme based on a package of measures. These include the convergent implementation of existing international rules in the Community; tighter port state control; harmonisation of navigation aids and traffic surveillance infrastructure, particularly in environmentally sensitive areas; support for international organisations to enable them to strengthen their primary role in the setting of international standards; and targeting the training and qualification of crews. The communication also proposes the formation of a Committee on Safe Seas to provide a forum for improved co-ordination.

Members of the Transport Working Group and the Commission are currently working towards agreement on an order of priorities for many of the proposed measures. The Transport Council will be invited to endorse the revised action programme in June this year. Together with my right honourable friend the Secretary of State, I look forward to attending that meeting and making progress on that important front.

Ensuring the highest possible shipping safety standards and reducing the risk of pollution from shipping are matters of paramount importance. At the international level we are continually striving to secure those higher standards. Nevertheless, as the "Braer" incident at the beginning of January demonstrated, accidents still happen.

Apart from our efforts at the international level we are also very conscious of the importance of taking the initiative to see what further action can be proposed to reduce further the risk of pollution. For that reason we have set up the inquiry under the chairmanship of the noble and learned Lord, Lord Donaldson, to advise on whether any further measures are appropriate and feasible to protect the UK coastline from pollution from merchant shipping, taking account of the international and—I remind my noble friend Lord Lucas—economic implications of any new measures. The noble and learned Lord began his oral evidence sessions last week. A wide range of bodies, including my own department, will be giving evidence. We shall look forward to receiving the noble and learned Lord's report in due course.

Given the international nature of shipping, I agree with the point made by my noble friend Lady Platt of Writtle that it is a matter of concern that some flag states are failing to meet their responsibilities in maritime safety. However, let me reassure her that we continue to strive at the international level towards higher standards.

My noble friend Lord Lucas of Chilworth asked for greater powers in that area to be given to the IMO. I wonder whether he is right. We must be careful when considering this, because there is a great deal of merit in keeping the onus on the flag state rather than on the IMO. We must not let the flag states off the hook of maintaining standards for their fleets.

Within the European Community our efforts will focus on tightening the enforcement of safety standards for foreign vessels visiting Community ports. We are also pressing for action in the International Maritime Organisation to ensure that flag states comply with their responsibilities to enforce internationally agreed safety standards. At the meeting of the IMO's Marine Safety Committee in December 1992 it was agreed to establish a sub-committee to consider why some flag states do not reach the necessary standards and what can be done to improve the position. The sub-committee met for the first time in April and the UK is taking a full and active part.

In this country, standards are monitored and enforced by marine surveyors from the Department of Transport carrying out thorough surveys and inspections. Because of our concerns relating to flag state implementation, we use the same surveyors to inspect foreign ships visiting our ports to ensure that internationally agreed minimum safety standards are maintained. That is known as port state control.

In 1982 the UK and 13 other European countries signed a memorandum of understanding on port state control which aimed to co-ordinate and harmonise the inspection efforts of the member countries. Each signatory to the memorandum agrees to inspect at least 25 per cent. of individual foreign ships using its ports in any 12-month period. I and my predecessors as shipping Ministers have set a higher target of 30 per cent. for this country, and that has been consistently exceeded.

Following a Ministerial conference in 1991 signatory states introduced inspections which look beyond the structure of the ship and its equipment. These "operational inspections" consider the quality of the onboard management and the effectiveness of officers and crew in running the ship safely and without threat to the marine environment. To ensure the best use of resources it is important to target ships which cause the most concern. Already special attention is paid to passenger ships, in particular ro-ro ferries, tankers and ships which are known to have had recent deficiencies. More recently agreement was reached, following a UK initiative, on an amendment to the memorandum which will allow the safety record of the flag state to be taken into account when selecting ships for inspection.

I turn to another part of the maritime world. The offshore supply vessel industry is basically very safe, but about 35 accidents were nevertheless reported to the marine accident investigation branch in 1992. Those accidents ranged from minor injuries to loss of life. Following one such incident, we decided to establish a consultation group, which met for the first time on 9th February 1993. Perhaps I may say to the noble Viscount, Lord Allenby of Megiddo, that the ongoing work will include a draft code of practice. That will apply to all supply vessels operating on the UK continental shelf, regardless of flag or ownership.

A number of noble Lords raised the important question of manning and training. The number of seafarers employed in the merchant navy depends essentially on the requirements of the industry. Nevertheless all UK sea-going ships of 500 tons or over, and foreign ships within UK territorial waters, are obliged under merchant shipping law to be in possession of a safe manning document. This document lists the minimum numbers and grades of personnel required to man a vessel safely and is assessed by marine surveyors after consideration of the operational requirements of each individual ship. In this way specific trading needs and other factors, such as voyage length and level of automation, are taken into account.

UK merchant navy officers usually train as new-entrant cadets and study for certificates of competency throughout their early careers. Financial assistance towards the training of UK cadets is provided by the Government Assistance For Training (GAFT) scheme. That is designed to encourage companies to train officer cadets. The number actually put forward for training is of course a matter for the commercial judgment of industry. Although the government money available for that purpose is limited, not all the places that it can fund are currently being taken up. Therefore it is not simply a question of increasing the amount of funds, as the noble Lord, Lord Carmichael, requested. It is up to the industry and the companies as well to provide the places.

The statutory certificate structure enables standards of competence in navigation and engineering to be laid down. It also ensures that postholders on board a vessel are properly qualified. Deck and engineer ratings in the UK receive on-the-job training and are recommended to have training in first aid, fire fighting and sea survival before going to sea.

A debate on the merchant fleet cannot be complete without mention of the great contribution that such shipping has made to our defence. As many of your Lordships will know, next month marks the celebration of the 50th Anniversary of the Battle of the Atlantic. This is an opportunity to pay testament to the heroism and patriotism of all those involved.

We continue to monitor the nation's defence needs. As my honourable friend, the Minister for Procurement, said in another place last July, sufficient shipping is available to support defence needs without special measures. Nevertheless, my department and the MoD are jointly working on a further review of the position of British seafarers required to man chartered and requisitioned vessels. The review will be completed shortly.

I have outlined a number of measures that we have taken and that we are taking to achieve our goals of creating the conditions in which British shipping can continue to prosper and to ensure safe seas, protecting passengers, cargo and the environment.

My noble friend Lady Platt of Writtle was among many who argued that there is need for fiscal measures to help the industry. The issue of special assistance to a particular industry is difficult to reconcile against the background of the efforts being made generally to create a favourable economic climate with low inflation and lower interest rates.

I take note of what my noble friend Lord Lucas of Chilworth said on that point. However, I found it difficult to understand his remarks—perhaps we can discuss the matter later—on how one can give assistance without giving subsidies. My right honourable friend the Chancellor of the Exchequer considered all those issues carefully. As noble Lords have reminded us, he concluded that there is not currently a case to be made for further support by the taxpayer.

The industry has drawn attention to the assistance given by other governments to their international shipping competitors primarily in the form of direct and indirect subsidies and cargo reservation schemes. To follow the example set by other nations would lead to an ever increasing spiral of state aids and market-distorting subsidies which would be detrimental to free trade. Instead of that, we shall continue to press hard in the EC and OECD the case for eliminating those practices.

We shall continue to press for further liberalisation of markets and increased competition free from subsidies and uncompetitive practices. Success in our endeavours in Europe and other fora worldwide will be of benefit to UK shipping, to British industry and ultimately to the often neglected consumer.

7.47 p.m.

Lord Greenway

My Lords, first, I must apologise for going over my allotted time at the start of the debate. It is the first time that I have moved a Motion. I was under the impression that I had 20 minutes. I was in error and I apologise.

I am most grateful to all noble Lords who have taken part. They have a wide range of experience. It is invidious to single out one noble Lord. However, I should like to mention the speech of my noble friend Lord Amherst of Hackney. If he will forgive my saying so, he is a prime example of a seafarer who has come ashore and had a successful job as a shipbroker.

I am most grateful to the noble Earl for his comprehensive reply to the debate. I enjoyed a great deal of it until he reached almost the end. I was looking for one chink of light—a ray of hope that perhaps the Treasury might be changing its mind and putting its money where its mouth is. It is all very well to praise our shipping but perhaps we need something more to help it on its way. Perhaps I had better recruit the services of the noble Lord, Lord Shackleton, whose tenacity is well known in this House with regard to the replacement of HMS "Endurance".

The noble Earl referred to the diverse nature of maritime interests in this country. That too is a matter that struck me when I was preparing for the debate. I wondered whether it might be an idea to set up a Committee of your Lordships' House to look into the whole maritime spectrum. It is an idea that I have mentioned to people in the maritime industry and they have all looked upon it with favour. I toss that in as an afterthought. Once again, I thank all those who have taken part and beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.