Marine Pilots (Compensation) (Hansard, 23 May 1986)

§ Mr. Moore

My right hon. Friend, the then Secretary of State for Transport, confirmed on 24 March, in answer to a question from my hon. Friend the Member for Bristol, East (Mr. Sayeed) that the Government intend to bring forward as soon as possible legislative proposals for the reform of pilotage administration. Those proposals will include provision for a compensation scheme, to be funded by the industry, for those licensed pilots whose services are not required by the harbour authorities once they have taken over responsibility for pilotage.

Although attempts to obtain agreement among the parties concerned on the terms of compensation payments have previously been unsuccessful, it was considered right to make one further attempt, and at my right hon. Friend's request Mr. James Davidson, the chairman of the Pilotage Commission, held discussions with representatives of the pilots, the shipowners and the harbour authorities about the terms of a compensation and linked early retirement scheme. He has also held discussions with the Pilots National Pension Fund whose board of management has agreed to make available £15 million from the fund's surplus towards the cost of early retirement.

Mr. Davidson has now reported that he has been able to secure the agreement in principle of the United Kingdom Pilots Association (Marine) and of the British Ports Association to terms which he has drawn up; however, the General Council of British Shipping has not been prepared to agree them.

Under the terms proposed by Mr. Davidson, any pilots over the age of 50 whose services were not required would receive a lump sum payment equivalent to one year's recommended level of earnings set for 1984 for his district under the former Letch agreement, increased by RPI until the scheme takes effect. Payments in districts not formerly covered by the Letch agreement would be related to the equivalent earnings for 1984, subject to the same increases. For pilots over the age of 60, the sum would be reduced by one-fifth for each year by which the pilot exceeded the age of 60. I understand that the rules of capital gains tax will apply to the lump sum payments.

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As regards pension arrangements, Mr. Davidson has reported that although the board of management of the PNPF had taken no decision as to the precise benefits to be applied to individuals, they had prepared a scheme under which surplus pilots aged 55 and over would be able to retire with an immediate pension determined on the basis that:

i the abatement factor on the pensions of those retiring early applied under the normal PNPF rules would be removed;
ii credits of 1/60 per year to cover the years to age 60 and, for those due to retire at 65 or over double credits to age 65 would be added;
iii pre-membership service credits of ½ per cent per month would be added in respect of expected service from age 60 to 65 (with a maximum of 30 per cent);
iv the maximum additional credits under ii and iii above would be 15/60 per man and the Inland Revenue limit on the size of pension would of course apply.

Any pilots aged between 50 and 55 who are surplus to requirements would receive similar benefits save that the abatement factor referred to in (i) above of ½ per cent per month would apply. Mr. Davidson has advised me that in his view the sum allocated by the PNPF would be adequate to meet the early retirement on this basis of such pilots as are surplus when the new legislation takes effect, and also any further surpluses over the ensuing three years.

I know that some may regard the lump sum and pension terms set out above as generous, and it is indeed unusual for such payments to be made to people who are classified as self-employed. However, in view of the fundamental change which our proposed legislation will cause to the circumstances and expectations of many pilots, I accept that there is an obligation to ensure that they are fairly treated, and it is my intention that the statutory scheme to be introduced in association with the new legislation wall provide for compensation on the basis which the representatives of the pilots and of the harbour authorities have now agreed.

I am grateful to Mr. Davidson for his efforts in bringing forward these proposals.